USD/CAD keeps heading south and approaches important support at 1.3520

The US Dollar has extended losses against its Canadian counterpart on Tuesday reaching to hit session lows at 1.3526, only a few pips above three-week lows at 1.3520.

Hopes of Fed easing are weighing on the US Dollar

The greenback has remained on the back foot on the back of the release of Friday’s macroeconomic figures. The PCE core prices Index showed cooling inflation for the third consecutive month, while US consumer spending remained practically unchanged in November.

These figures add reasons to anticipate a slowdown in Federal Reserve's rate hikes, which is acting as a headwind for the US dollar.

Furthermore, oil prices have continued crawling higher, with the US benchmark WTI reaching levels past $80, which has appreciated nearly 15% from early December lows. The rising crude prices offer additional support to the commodity-linked CAD, which has gained about 1.25% over the last seven days.

USD/CAD about to test 1.3520 support

From a technical point of view, the breach of trendline support in the vicinity of 1.3600 has negated the USD/CAD’s upside trend from Mid-November lows at 1.3230, and the pair seems set to test 1.3520 support area, which could trigger further selling pressure.

A confirmation below the mentioned 1.3520 might boost confidence for bears to push the pair towards the 100-day SMA, now at 1.3410 on its way to December 5 low at 1.3385.

On the upside, the pair should return above the 50’day SMA, at 1.3540 to ease negative pressure and attempt to regain the previous trendline support at 1.3630 before aiming for December’s peak, at 1.3700.

USD/CAD Daily Chart

Technical levels to watch