USDCAD down -0.66% on the day; 'Do or Die' on critical support at 61.8% Fib

Currently, USD/CAD is trading at 1.3031, down -0.65% on the day or (89)-pips, having posted a daily high at 1.3123 and low at 1.2968.

The American dollar vs. Canadian dollar crashed close to 150-pips from today's day high as market participants adjusted their portfolio risk to avoid further losses as the Trump Trade fades due to aggressive political actions. Furthermore, the US economic docket failed to aid dollar bulls as the Consumer Confidence report printed 'a worse than expected' figure at 111.80. 

Historical data available for traders and investors indicates during January that USD/CAD pair had the best trading day at +1.71% (Jan.18) or 227-pips, and the worst at -1.02% (Jan.17) or (133)-pips.    

Poloz: Canadian Bond yields 'cannot equal' rising US yields

Bloomberg reports, "While it’s not clear how concerned Bank of Canada Governor Stephen Poloz is -- and Monday’s market tumble may have tempered any worries -- the recent strength does potentially pose a risk for monetary policy. Optimistic investors could drive up corporate borrowing costs and the currency, quelling the fragile recovery. Hinting at a mismatch with markets, Poloz reminded investors earlier this month that “rate cuts remain on the table.” He also said higher Canadian bond yields, driven by rising U.S. yields, aren’t consistent with the country’s economic outlook."

USD/CAD seen around 1.40 in the next months – BTMU

The report continues, "There are some good reasons to be optimistic. The Canadian economy is expected to finally emerge from the oil shock and grow in real terms at or above 2 percent for the first time since 2014 -- fast enough to eat into some of the nation’s idle capacity. Nominal GDP growth is seen rising to about 4 percent, considered to be about normal for Canada."

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 1.3180 (horizontal resistance), then at 1.3283 (100-DMA) and above that at 1.3310 (50-DMA). While supports are aligned at 1.3112 (200-DMA), later at 1.3060 (horizontal support) and below that at 1.3017 (low Jan.17). On the other hand, Stochastic Oscillator (5,3,3) seems to retrace from the oversold territory and head north, therefore, there is evidence to expect further dollar gains in the near term. 

On the long term view, if the 'double Doji' candlestick formation from November and December 2016 (1.3500-80 region) is in fact, a critical resistance-top, the upside potential seems limited for this currency pair. Then, to the downside, supports are aligned at 1.2967 (short-term 61.8% Fib), later at 1.2651 (long-term 50.0% Fib) and finally below that at 1.2435 (short-term 50.0% Fib).

If prices close and open above 1.3270-90 region (horizontal resistance, August 2015), only then, the previous long-dollar narrative would have a new opportunity to attempt a new run against 1.3490 (long-term 61.8% Fib) and finally above that level the next logical challenge would be at 1.3800-20 (horizontal resistance). 

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