- USD/CAD gained some positive traction on Wednesday and recovered the overnight losses.
- A combination of factors held bulls from placing aggressive bets and capped any further gains.
The USD/CAD pair built on its steady intraday positive move and shot to fresh daily tops, around the 1.2575 region heading into the North American session. The momentum allowed the pair to recover the previous day's losses, though lacked any strong follow-through buying.
Despite a modest pickup in the US Treasury bond yields, the US dollar languished near three-week lows and held bulls from placing aggressive bets. Apart from this, bullish crude oil prices underpinned the commodity-linked loonie and further collaborated towards capping gains.
From a technical perspective, the USD/CAD pair managed to attract some dip-buying near the 1.2525 region, or the lower boundary of the weekly trading range. This is followed by the monthly lows, around the 1.2500 psychological mark, which should act as a key pivotal point.
Looking at the larger picture, the USD/CAD pair has been trending lower along a four-month-old descending channel. This points to a well-established bearish trend. That said, the recent price action over the past four weeks or so has been confined in a broader trading range.
Moreover, neutral technical indicators on the daily chart haven't been supportive of any firm direction. This, in turn, makes it prudent to wait for a sustained break through the trading range before confirming the next leg of a directional move for the USD/CAD pair.
In the meantime, any subsequent positive move is likely to confront some resistance near the 1.2600 mark. This is closely followed by the trend-channel barrier, around the 1.2625-30 supply zone, which if cleared decisively will be seen as a fresh trigger for bullish traders.
The subsequent short-covering move has the potential to lift the USD/CAD pair further towards the 1.2700 round-figure mark. Bulls might then aim to test the next relevant resistance near the 1.2740-50 region.
On the flip side, the 1.2525 region, followed by the 1.2500 mark might continue to protect the immediate downside. Sustained weakness below will negate prospects for any further positive move and set the stage for the resumption of over the one-year-old downward trajectory.
USD/CAD daily chart
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Technical levels to watch
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