USD/CAD threatens to break out from the two-month range

Technical Analysis

Author: Adam Button | usdcad

USD/CAD technical analysis

This is such a tough time of the year to trade. You never know if a move is real or it's driven by low liquidity and flows that will be unwound once the calendar turns.

USD/CAD is lower for the fifth day in six as part of a reversal after briefly touching a six-month high on December 19. The pair is on the verge of falling below the December low to the worst level since October 20.

A break would clear the way to a test of support near 1.2450.

However, I'm loath to believe any break at this time of year. Signals are often unreliable and the US dollar is broadly slumping today on what looks like year-end flows.

The one good sign for the Canadian dollar is oil, which has broken out to the best levels of the year. It's a market that's less driven by financial flows and more by real-money transactions. Looking ahead, that could be a positive catalyst for the loonie.