The USD/CAD has been a prime beneficiary of the December rally in WTI crude oil. Prices of the February WTI futures contract gained almost $6 per barrel for the period, an uptick of more than 10%. Subsequently, the Loonie posted solid gains vs the Greenback, with the USD/CAD driving lower by 296 pips.

However, today’s action in the Loonie has defied its traditional correlation with crude oil pricing. February WTI has spiked by more than $1.65 per barrel and posted an intraday high of $64.00. Nonetheless, the USD/CAD is slightly in the green despite the news-driven rally in oil. For now, it looks like forex players are content with this pair settling near the 1.3000 handle.

USD/CAD Up Modestly Going Into Weekly Close

Fresh civil unrest in Iraq and drone strikes from U.S. forces sent the USD/CAD south to open the trading year. Now, the action has calmed down just beneath the 1.3000 big-round-number.

Going into next week’s trade, there are two levels on my radar for the USD/CAD:

• Resistance(1): 38% Retracement, 1.3038
• Support(1): Swing Low, 1.2951

Bottom Line: Although rates are up modestly in today’s session, a bearish bias remains warranted for the USD/CAD. The daily downtrend is very much intact, with only psychological levels being present as support. At this point, another test of the 1.2950 area is highly probable for the near future.

In the event we see rates bounce above 1.3000, a short from Fibonacci resistance may come into play. As long as the Swing Low (1.2951) holds up as a short-term bottom, I will have sell orders in the queue from 1.3031. With an initial stop at 1.3076, this trade produces 40 pips using a sub-1:1 risk vs reward ratio.