Close but below 1.2700 before important speech

• A combination of factors drove USD / CAD modestly back on Friday.
• The configuration supports the prospects for the emergence of lower level buying.
• The focus remains on Fed Chairman Powell’s speech at the Jackson Hole Symposium.

The USD / CAD pair struggled to capitalize on its modest rally, or find acceptance above 1.2700 and failed to do so. There was a pullback to the 1.2660 area. In the preview of the American session, it cuts losses and operates at 1.2680.

A further rise in crude prices propped up the loonie and acted as a headwind for the USD / CAD pair. On the other hand, underlying bullish sentiment weighed on the US dollar, which was also affected by a slight decline in Treasury yields. That said, moves are still muffled ahead of Fed Chairman Jerome Powell’s long-awaited speech at the Jackson Hole Symposium.

From a technical perspective, the USD / CAD pair, so far, has managed to hold its neck above the mid-1.2650s. Some selling could fuel technical selling and further accelerate the intraday decline towards confluence support at 1.2600. This level comprises the 200-period simple moving average on the 4-hour chart and a short-term rising trend line that extends from the lows in late July.

Meanwhile, heThe technical indicators on the day and hour charts are comfortably in positive territory and support prospects for some lower level buying. With that said, the bulls are likely to wait for sustained strength beyond 1.2700 before placing new bets. The USD / CAD pair could accelerate momentum further towards the intermediate resistance zone of 1.2740-45.

Secondly, a convincing break below 1.2600 could lead to an extension towards the 1.2545 region, which coincides with the very important 200-day simple moving average. Further declines could enable an extension of the recent sharp drop from 1.2950, ​​the highest level since December 2020 touched last Friday.

USD / CAD 4-hour chart