Despite the bounce, the bears are likely to retain control amid a bearish technical setup seen on the hourly chart.
The spot has confirmed a death cross formation on the given timeframe. A death cross is a bearish crossover and it occurs when the 50-simple moving average (SMA) crosses the 200-SMA from above.
The Relative Strength Index (RSI) has bounced-off lows but remains well below the midline, at 35.55, suggesting that the downside remains more compelling.
The recovery in USD/CAD is likely to meet strong offers at 1.2696, where the bearish 21-SMA aligns.
Recapturing the latter is critical to unleashing further recovery gains, with eyes set on the 1.2717 level. At this point, the 50 and 200-SMAs coincide.
On the flip side, a breach of the four-day-old falling trendline support at 1.2660 could trigger a sharp sell-off, opening floors for a test of the January 6 low at 1.2630.