USD/CAD falls to six-week low. What’s next

Canadian dollar analysis

USD/CAD broke below 1.2600 to the lowest since Feb 22.

The decline cut through the 200-day moving average today and now tests the 61.8% retracement of the rally since the start of February. It clocks in at 1.2581.

In the bigger picture, the pair continues to resolve the head-and-shoulders top with a neckline at 1.2800. The measured target of the move coincides with a zone of support near 1.2450.

If the 61.8% level breaks, look for a continued slide down to that zone.  However, the pair is somewhat oversold in the near term so the risks of a bounce are increasing, especially with the potential for a strong US CPI on Wednesday.

On the Canadian side, the calendar is very light this week.