The USD/CAD has collapsed after its parabolic rise ended in mid-January, when oil prices first showed signs of stabilisation. Since peaking at just shy of 1.4700, the Loonie has tumbled to below 1.30, hitting a low of 1.2925 last week. It has shed in the process some 1765 pips from the high to the low, or almost 23 per cent in the space of only nine weeks. At the start of this week, the USD/CAD has bounced back somewhat. It is interesting to note that the CAD has weakened here despite the strong Canadian retail sales data that we saw at the end of last week. With oil prices also looking constructive, the rebound in this currency pair looks to be driven by the US dollar rather the Canadian dollar. As such, it is unlikely to last.
Indeed, from a technical point of view, the longer term outlook on the USD/CAD continues to look bleak. As the weekly chart shows, below, the Loonie is currently beneath a pivotal support and resistance area around 1.3400, and below a short-term resistance level at 1.3170. The RSI has not reached the “oversold” threshold of 30 yet, so there is plenty of room for further losses. In fact, the selling pressure could accelerate if the next support zone in the 1.2670-2830 zone fails to hold. This area is where previous resistance meets with the 38.2% Fibonacci retracement of the long-term upward swing.