USD/CAD touches top of major channel below 1.3300, its highest since 2020 amid bearish oil/stronger USD

USD/CAD gains strong follow-through traction on Friday and climbs to a 22-month high.
Bearish oil prices undermine the loonie and offer support amid resurgent USD demand.
The fundamental, technical backdrop supports prospects for a further appreciating move.

Haresh Menghani FXStreet

The USD/CAD pair prolongs this week's strong rally from the vicinity of mid-1.2900s and gains strong follow-through traction on Friday. The momentum lifts spot prices to the highest level since November 2020, with bulls now eyeing to reclaim the 1.3300 round-figure mark, though long-term resistance at 1.3275 will need to be overcome before further gains can be expected.

Crude oil prices languish near the weekly low and undermine the commodity-linked loonie, which, in turn, acts as a tailwind for the USD/CAD pair. Apart from this, the emergence of fresh buying around the US dollar provides an additional lift to the major and contributes to the bullish momentum.

Investors remain concerned that a deeper global economic downturn and fresh COVID-19 lockdowns in China will dent fuel demand. This, to a larger extent, overshadows worries about tight global supply and weighs on the black liquid, which remains on track to register a third successive week of losses.

The USD, on the other hand, is looking to build on the stronger US CPI-inspired rally amid rising bets for a more aggressive policy tightening by the Fed. This, along with the risk-off impulse, drives some haven flows towards the greenback and offers additional support to the USD/CAD pair.

Friday's strong momentum could also be attributed to some technical buying following the overnight sustained strength and close above the 1.3200 round-figure mark. A subsequent move beyond the previous YTD peak could be seen as a fresh trigger and might have set the stage for further gains. Yet price has now reached a major trend line – the cieling of a multi-year rising channel that began back in April 2021 – and this is likely to act as a stopping point and resistance level, with bears mounting a defence. A daily close or open above the trend line, at around 1.3275 will be necessary to forecast further gains and bulls may wish to act with caution until it is fully in the rear-view mirror.

Market participants now look forward to the Preliminary Michigan Consumer Sentiment Index from the US, due later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD and provide a fresh impetus to the USD/CAD pair.

Technical levels to watch

USD/CAD

Overview
Today last price	1.3288
Today Daily Change	0.0061
Today Daily Change %	0.46
Today daily open	1.3227

Trends
Daily SMA20	1.3077
Daily SMA50	1.2967
Daily SMA100	1.2906
Daily SMA200	1.2793

Levels
Previous Daily High	1.324
Previous Daily Low	1.3154
Previous Weekly High	1.3209
Previous Weekly Low	1.2982
Previous Monthly High	1.3141
Previous Monthly Low	1.2728
Daily Fibonacci 38.2%	1.3207
Daily Fibonacci 61.8%	1.3187
Daily Pivot Point S1	1.3174
Daily Pivot Point S2	1.3121
Daily Pivot Point S3	1.3087
Daily Pivot Point R1	1.326
Daily Pivot Point R2	1.3294
Daily Pivot Point R3	1.3347

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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