One of the weakest currency pairs during the pandemic, the USD/CAD, found strong support at the 1.20 area. While not reaching the 1.20 per se, it did form a triangle as a reversal pattern right above the pivotal area, and now threatens with a reversal.
Should we see more continuation, the path remains bullish with a move towards the 1.23 level. Because the Canadian dollar is strongly linked to the crude oil price, the move higher in the USD/CAD may come as a result of the Iranian deal currently under negotiations in Vienna, Austria.
The USD/CAD pair is one of the currency pairs most difficult to trade at this time. It is sensitive to Fed news, the Bank of Canada’s tapering, as well as to any movement in the price of oil.
If the Fed hints at tapering, that is positive for the pair. But the Bank of Canada already has a schedule for the asset purchases tapering, so that is negative for the pair. If a deal with Iran is reached, that should weigh on the crude oil price, hence hurting the Canadian dollar. All in all, a difficult pair to trade from a fundamental perspective.
USD/CAD Technical Analysis
The technical perspective looks more promising. Bulls may want to stay on the long side with a stop at 1.20 and a take-profit at 1.23.