The USD/CAD pair accelerated its drop as the USD was weakened by the Dollar Index's sell-off. As long as the DXY drops, the currency pair could approach and reach new lows. It was traded at 1.2655 at the time of writing far below last week's high of 1.2885.
As you already know, the price plunged as the Dollar Index is in a corrective phase. Fundamentally, the USD took a hit from the US economic data last week. Today, the CAD was lifted by the Canadian Current Account which came in at 5.0B versus -0.2B estimates. Tomorrow, the Canadian Gross Domestic Product is expected to report a 0.5% growth, while the US Consumer Confidence may drop to 103.9 points from 107.3 in the previous reporting period.
The US NFP, Average Hourly Earnings, Unemployment Rate, ADP Non-Farm Employment Change, JOLTS Job Openings, and the ISM Manufacturing PMI are seen as high-impact events and could really shake the markets.
USD/CAD Strong Downside Pressure!
As you can see on the H4 chart, USD/CAD found resistance at the ascending pitchfork's upper median line (uml) signaling that the upside movement ended. It has escaped from the pitchfork's body and now it has dropped far below the warning line (wl1).
The price reached 1.2675 - 1.2650 support zone. The pressure is high, so it could ignore the demand zone and it could hit fresh new lows.
USD/CAD Prediction!
After its massive drop, we cannot exclude a temporary rebound. False breakdowns below 1.2650 or a bullish pattern could signal a bounce back. On the other hand, a valid breakdown of the support levels could open the door for a larger drop.
Personally, I would like to see a rebound before looking for potential new short opportunities. Also, closing below the 1.2650 followed by a sideways movement could announce more declines toward 1.26.
