USD/CAD finds support (but 1.40 still beckons)

USD/CAD has spent most of the past two weeks stuck on sell mode, after its short-lived rise to the 22-year high of 1.48 came crashing down thanks to tariffs being delayed.

Due to bears closing shorts on CAD futures and bulls shying away from long USD bets, my core view is for USD/CAD down to 1.40, just above the 2022 high. But over the near term it shows the potential for a bounce towards 1.43.

Last week's low stalled around a weekly VPOC and November high. A small bullish hammer and inside-day doji also formed around the 100-day EMA, while a bullish divergence also formed on the daily RSI (2) in the oversold zone.

Bulls could seek dips towards the weekly VPOC in anticipation of a bounce to 1.4250, while prices hold above last week's low. At which point we can revisit its potential to roll over once more, in line with the core bias outlined above.

Matt Simpson, Market Analyst at City Index and forex.com