• The CAD recent weakness may prove short-lived as coronavirus cases notably decline.
• USD/CAD may extend its push to fresh yearly highs after clearing key resistance.

As expected, the relentless surge of coronavirus infections in Canada has notably weighed on the local currency in recent days. Moreover, surprisingly hawkish commentary out of the Bank of Canada could underpin the Canadian Dollar, with the central bank hinting at the possibility of pulling back on some of its supportive measures as the local economy continues to recover.

USD/CAD DAILY CHART – EYEING RESISTANCE AT NOVEMBER LOW

The USD/CAD exchange rate seems poised to extend its recent rebound higher, as price bursts above theJanuary 4 high (1.2798).

With the MACD indicator climbing to its highest levels since November, further gains appear in the offing. MACD has diverged in favor of the bulls. MACD histograms has produced higher lows , contradicting lower lows on the price chart. That bullish divergence indicates a potential for a bounce.

Breaching psychological resistance at 1.2900 would probably generate a push to challenge range support at 1.2930 – 1.2960. Clearing that likely brings the 1.300 psychological round figure mark resistance which coincides with the Fibonacci 161.8% .

However, if 1.2900 remains intact, a pullback towards former support-turned-resistance at the January 4 high (1.280) could be on the cards. Piercing that likely neutralizes near-term buying pressure and paves the way for the exchange rate to retest the yearly low / support zone around 1.2600.