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Talking Points:
- USD/CAD Technical Strategy: Flat
- Support: 1.2556, 1.2421, 1.2187
- Resistance: 1.2801, 1.2881, 1.3036
The US Dollar may be preparing to turn lower against its Canadian namesake following the formation of a Bearish Engulfing candlestick pattern. Negative RSI divergence reinforces the case for a downside scenario. A daily close below the 14.6% Fibonacci retracement at 1.2566 exposes the 23.6% level at 1.2421. Alternatively, a push above the January 30 high at 1.2801 clears the way for a challenge of the 38.2% Fib expansion at 1.2881.
Risk/reward considerations argue against entering short with prices in close proximity to support. On the other hand, the absence of a defined bullish reversal signal suggests taking up the short side is premature. We will remain flat for now, waiting for a more actionable opportunity to present itself.
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Daily Chart - Created Using FXCM Marketscope
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
