• USD continues gaining positive traction.
• Weaker oil prices providing an additional boost.
• All eyes remain glued to the FOMC meeting minutes.
The USD/CAD pair built on overnight bullish breakthrough 100-day SMA barrier and jumped to 1-1/2 week tops during the early European session on Tuesday.
Against the backdrop of a strong follow-through US Dollar demand, underpinned by surging US Treasury bond yields, the pair on Tuesday got an additional boost from weaker-than-expected Canadian wholesale trade sales data for the month of December.
This coupled with a sharp retracement in crude oil prices, which tends to dent demand for the commodity-linked currency - Loonie, provided the required momentum and assisted the pair to surge past 100-DMA strong hurdle near the 1.2620-30 region.
The pair continued scaling higher on Wednesday and was being supported by a combination of factors, namely - stronger greenback and weaker trading sentiment around oil prices. The up-move could be attributed to subsequent technical buying, reinforcing previous session's bullish breakout.
Investors now shift their focus to the highly anticipated FOMC meeting minutes, which might influence Fed rate hike expectations and eventually drive the buck in the near-term. There isn't any market moving Canadian economic data due for release on Wednesday and hence, the USD price dynamics might continue to act as an exclusive driver of the pair's momentum.
Technical levels to watch
The ongoing bullish momentum seems strong enough to continue boosting the pair towards reclaiming the 1.2700 handle en-route the very important 200-day SMA hurdle near the 1.2720 region.
On the flip side, any profit-taking slide now seems to find immediate support near the 1.2620 region (100-DMA), which if broken might prompt some additional long-unwinding and drag the pair back below the 1.2600 handle towards its next support near the 1.2560-55 region.
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