Weak domestic oil prices have undermined the CAD, placing it on a defensive tone. However, USD/CAD needs to sustain a rally over a 1.3024 Fibonacci marker and 200-week moving average at 1.3043 to grease further upside momentum, Benjamin Wong, Strategist at DBS Bank reports.

Seasonality studies show CAD is usually on its backfoot in May

“The focus now rests on USD sustaining its bullish pace from recent 1.2403 lows over the 200-week moving average at 1.3043, and the 38.2% Fibonacci retracement of the 1.4668 (March 2020 peak) decline trough low at 1.2007 (June 2021 lows) at 1.3024. The technical indicators all have their tails up, thus siding with the bullish USD mode.”

“The Canadian Effective Exchange Rate measure reveals ongoing CAD weakness, and seasonality studies shows CAD is usually on its backfoot in May.”