- A combination of supportive factors propelled USD/CAD higher for the third day in a row.
- Falling oil prices undermined the Canadian dollar and it remained supported amid a stronger USD.
- The bulls, however, struggled to break above a two-week trading range resistance.
The pair USD/CAD built on last week’s good recovery move from the 1.2635 area, or monthly lows, and gained positive traction for the third day in a row on Monday. The momentum took prices of the pair to a one-week high and was sponsored by a combination of factors.
Despite rising geopolitical tensions between Russia and the West over Ukraine, crude oil prices saw some profit-taking from a more than seven-year high. This, in turn, undermined the commodity-linked Canadian dollar and extended some support to the USD/CAD pair amid broad-based US dollar strength.
The bulls, however, had trouble capitalizing on the strength and the positive intraday move faltered near the 1.2780-1.2785 area. The said area marks the monthly high and the upper end of a familiar trading range held over the past two weeks, which should now act as a key point for short-term traders.
Given that the technical indicators on the daily chart have just started to gain some positive traction, a convincing advance will be seen as a new trigger for the bulls. Some follow-up buying beyond the 1.2800 mark will reaffirm the constructive outlook and pave the way for a further appreciation move.
The next relevant resistance is set near the 1.2835 region, above which the USD/CAD could extend momentum towards the 1.2900 mark, with some intermediate hurdle near the 1.2870-75 area.
On the other hand, the 1.2700 level now seems to protect the immediate drop ahead of Friday’s low, around the 1.2670-1.2665 region. This is followed by the 1.2635 area, or the monthly low, which if broken decisively will nullify the short-term positive bias and make the USD/CAD pair vulnerable to further decline.
The downward path could drag the price below 1.2600 towards the test of the 1.2570-1.2560 support and the very important 200-day SMA around the 1.2520-1.2515 area. This is followed by the 1.2500 level, below which the USD/CAD pair could drop to the yearly low around 1.2450.
USD/CAD daily chart
Additional technical levels
Source: Fx Street
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