The Canadian dollar is leading the major currencies bloc on the day
Things are really looking up for the loonie as we begin the February month. USD/CAD broke below the 200-day MA (blue line) last week and that sees sellers take control of the pair now in terms of directional trading. Add to the fact that oil should see support from seasonal factors, there is a strong case for the loonie to extend its gains further from current levels.
Oil is holding steady on the day with WTI up by 0.2% currently and with the daily chart highlighting where the bias/momentum lies now, USD/CAD looks to be headed towards a test of 1.3000 at least in the near-term.
That said, it's one step at a time for sellers. First, there's the key trendline support stemming from February last year to navigate through. The trendline level sits at 1.3060 today.
The importance of the level is more defined when you look at the weekly chart:
It's part of a channel for a move higher in USD/CAD that has been ongoing since the latter half of 2017. Hence, breaking below that will prove to be a huge psychological blow for buyers. Of note, the 200-week MA sits at 1.3043 so that may be a level of interest as well in terms of levels to watch out for.
At this stage, a lot hinges on the dollar side of the equation. The loonie aspect looks to be more or less well-shaped and we know that the currency should stay supported, so if the dollar breaks down then expect this pair to really run to the downside as key technical levels i.e. trendline support and 1.3000 handle start being breached.
