- USD/CAD faced rejection near 200-day SMA and edged lower on Wednesday.
- The set-up still favours bulls and supports prospects for a break to the upside.
- Sustained weakness below 1.2500 is needed to negate the positive outlook.
The USD/CAD pair continued with its struggle to find acceptance/build on the momentum beyond the 1.2600 mark and faced rejection near the very important 200-day SMA on Wednesday. The pair dropped to fresh daily lows, around the 1.2560 region and has now reversed a part of the previous day's positive move.
A modest uptick in crude oil prices underpinned the commodity-linked loonie and turned out to be one of the key factors that acted as a headwind for the USD/CAD pair. That said, renewed buying interest around the US dollar should help limit any meaningful pullback for the major, at least for the time being.
The prevalent risk-off environment continued benefitting the safe-haven greenback, which was further supported by a goodish pickup in the US Treasury bond yields. Apart from this, traders might also be reluctant to place any aggressive bets ahead of the Canadian CPI report and the FOMC monetary policy decision.
Looking at the technical picture, the USD/CAD pair has been oscillating in a range over the past one week or so. The top boundary of the trading band coincides with 200-day SMA and should act as a key pivotal point for short-term traders. A sustained strength beyond will set the stage for additional gains.
Meanwhile, technical indicators on the daily chart – though have corrected from higher levels – are still holding comfortably in the bullish territory. This, in turn, supports prospects for the emergence of some dip-buying at lower levels. Hence, any subsequent fall might still be seen as a buying opportunity.
From current levels, the 1.2525 horizontal zone should protect the immediate downside ahead of the 1.2500 psychological mark. A convincing break below might shift the bias in favour of bearish traders. The USD/CAD pair might then turn vulnerable and accelerate the slide to the next relevant support near the 1.2435 region.
On the flip side, some follow-through buying beyond the 1.2600 mark will be seen as a fresh trigger for bulls and lift the USD/CAD pair towards the 1.2665-70 intermediate hurdle. The momentum could further get extended towards the 1.2700 mark before bulls eventually push the pair to the 1.2770-75 resistance zone.
USD/CAD 4-hour chart
-637630699511472309.png)
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.