USD/CAD falls to fresh 14-month low, approaches 1.25 handle

After starting the week quietly around mid-1.25s, the USD/CAD pair met a fresh selling wave post-Canada data and dropped to its lowest level since early May of 2016 at 1.2511. As of writing, the pair was trading at 1.2515, losing 0.19%, or 25 pips, on the day.

Crude oil prices, which closed the previous week in the negative territory, are making a recovery on Monday, pushing the barrel of West Texas Intermediate above $46, allowing the commodity-sensitive loonie to find demand. Furthermore, today's macro data from Canada showed that wholesale sales advanced to a record high at $61.6 billion in May, increasing 0.9% on a monthly basis, further helping the CAD gather strength. Right now, the barrel of WTI is trading at $46.16, gaining 0.85%.

• Canada: Wholesale sales rose 0.9% to a record high $61.6 billion in May

On the other hand, ahead of the PMI data from the U.S., the US Dollar Index failed to make a meaningful recovery as it lost its momentum before testing the 94 mark in the European session. At the moment, the index is at 93.75, virtually flat on the day.  Preliminary PMI data that will be released by Markit for the manufacturing and the service sectors at 13:45 GMT are not expected to show any significant changes, making it likely for the index to remain in its daily range. 

Technical outlook

The pair could face the initial support at 1.2500 (psychological level) ahead of 1.2460 (May 3, 2016, low) and 1.2365 (Jun. 2, 2015, low). The RSI on the daily graph is moving below the 30 mark for the tenth day in a row, suggesting that oversold conditions persist. On the upside, near-term resistances could be found at 1.2610 (10-DMA), 1.2670 (Jul. 18 high) and 1.2765 (20-DMA).