USD/CAD prices have rallied more than 4% off the monthly lows with the advance now testing a critical resistance barrier we’ve been tracking for weeks now around 1.2723. The advance looks vulnerable heading into tomorrow’s Canada CPI report and the focus is on a possible near-term exhaustion play off these levels.

USD/CAD DAILY PRICE CHART

Technical Outlook: In my USD/CAD Weekly Technical Perspective published earlier this month, we noted that the USD/CAD, “rebound may have further legs near-term but ultimately we’re looking for exhaustion in price on a rally towards the 200-week moving average at 1.2620s and confluence resistance into the December high-week reversal close at 1.2726 (bearish invalidation).”

Price is testing this key resistance confluence today at 1.2715/23 where basic slope resistance converges on the 61.8% extension of the February advance and the 200-day moving average. The immediate topside bias is at risk here with a daily close above 1.2777 needed to suggest that a larger breakout is underway. That said, we’re looking to fade strength near-term while below this threshold.

USD/CAD 120MIN PRICE CHART

Notes: A closer look at USDCAD price action shows the pair trading within the confines of a near-term ascending Andrew’s pitchfork formation with today’s rally failing at the upper parallel- further highlighting the 1.2715/23 resistance range. Look for interim support at 1.2663 with near-term bullish invalidation now raised to 1.2626.

Bottom line: Looking to fade strength while below 1.2723 with a break of the lower parallel needed to validate the reversal targeting 1.2797 & the 61.8% retracement at 1.2566. Keep in mind we get the release of Canada CPI (Consumer Price Index) tomorrow with the release likely for fuel added volatility in the Loonie crosses.