It has been a slow forex news day, but the USD/CAD has been active. In response to a 3% (+$2.00) bump in CME September WTI crude oil, the Loonie has plunged more than 40 pips. Now, rates are in the vicinity of 1.2500 and a formidable downside support level.

There haven’t been many USD market drivers in the forex today. Perhaps the largest development comes from Capitol Hill, where passage of the massive $1 trillion infrastructure bill appears imminent; the only real question is when. At press time, here is where the situation stands:

• The Senate voted to pass the bill by a 69-30 margin.
• Now, the bill goes to the House of Representatives for approval.
• POTUS Biden on Twitter: “Big news, folks. The Bipartisan Infrastructure Deal has officially passed the Senate. I hope Congress will send it to my desk as soon as possible so we can continue our work of building back better.”

Perhaps the biggest story from Capitol Hill today is not the infrastructure bill, but plans for more government spending. Upon the infrastructure bill passing the Senate, the $3.5 trillion “social spending plan” was immediately put forth. So, it isn’t impossible for Congress to give the greenlight to $4.5 trillion in spending by Christmas.

Bearish sentiment has dominated today’s trade of the USD/CAD. Let’s dig into the technicals and see where this market stands.

USD/CAD Falls Toward Support

As you can see from the weekly chart below, the 38% Fibonacci retracement (1.2501) is within striking distance for the USD/CAD. 

Bottom Line: Unless we see rates become established beneath the weekly 38% retracement, a bullish bias is warranted for the USD/CAD. Until Friday’s closing bell, I’ll have buy orders in the queue from 1.2504. With an initial stop loss at 1.2444, this trade produces 60 pips on a standard 1:1 risk vs reward ratio.