- USD / CAD regains positive traction on Tuesday and is closing in on the 1.2550 hurdle again.
- Mixed technical indicators on hourly / daily charts warrant caution for aggressive bulls.
- The 100 hourly SMA now becomes a solid base and should help limit any significant drops.
The USD / CAD pair has built on the previous day’s solid bounce from near the 100 hourly SMA and gained some traction during the Asian session on Tuesday. Momentum has driven the pair towards the 1.2550 region, a resistance marked by the 50% Fibonacci retracement of the recent drop from 1.2740 to 1.2365, the lowest level since February 2018.
The US dollar has recovered demand following optimistic comments the previous day from Fed Chairman Jerome Powell and US Treasury Secretary Janet Yellen, reaffirming the optimistic US economic outlook. a softer tone around crude oil prices has weighed on the Canadian dollar, a currency pegged to commodity prices, and continued to support the positive intraday movement of the USD / CAD pair.
Meanwhile, the technical indicators on the 1-hour chart have been gaining positive traction and support the prospects for additional intraday gains. With that said, the oscillators on the daily chart, although they have been recovering from negative territory, have yet to confirm the bullish outlook, which warrants some caution before positioning for any further bullish movement.
Therefore, any subsequent strength is more likely to face strong resistance near the previous strong support, around the 1.2575 region. This level coincides with the 61.8% Fibonacci and should now act as a key fundamental point. A sustained move above this region will mark a further break to the upside and pave the way for an extension of the current recovery from multi-year lows.
On the other hand, the 38.2% Fibonacci, around the 1.2515-10 region, now appears to defend the immediate drop before the key psychological level of 1.2500. This is closely followed by the 100 hourly SMA, around the 1.2480 region and the 23.6% Fibonacci region, near 1.2450, which if broken will negate any positive short-term bias and trigger some technical selling.
The USD / CAD pair could become vulnerable and accelerate the decline to the round level of 1.2400. The move to the downside could extend further and allow the bears to challenge the multi-year low support around the 1.2365 region touched last week.
USD / CAD 1 hour chart
USD / CAD technical levels
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