- USD/CAD saw some selling on Friday and pulled back further from a two-month high.
- The setup still favors bullish trading and supports the prospect of buying on dips.
- A further drop could find decent support near the 1.2725-20 area.
The USD witnessed some selling at the beginning of the North American session and dragged the pair down USD/CAD to a new daily low, around the 1.2765 area in the last hour.
Global risk sentiment received a minor boost amid reports that Russia is ready to send a delegation to Minsk for talks with Ukraine. This, in turn, affected the safe haven status of the dollar and put some downward pressure on the USD/CAD pair.
However, the decline remained limited, at least for now, amid subdued price moves around crude oil prices, which failed to provide any significant boost to the commodity-linked Canadian dollar. This, in turn, warrants some caution for aggressive bear traders.
From a technical perspective, the overnight sharp move to a two-month high confirmed a short-term bullish break through a four-week trading range. This, coupled with the fact that the technical indicators on the daily chart have just started to gain positive traction, support the prospect of some buying on the dips around the USD/CAD pair.
Therefore, any further decline towards the 1.2730-1.2725 region could still be seen as an opportunity to initiate further bullish positions and remain capped near 1.2700. The next relevant support is tied near the lower end of the aforementioned trading range around 1.2650, which should act as a strong short-term base for the USD/CAD pair.
On the other hand, the 1.2800-1.2810 region now seems to act as an immediate resistance. Sustained strength and some follow-up buying beyond the 1.2825-1.2830 area has the potential to push the USD/CAD pair towards overnight highs around the 1.2875-1.2880 area. The momentum could extend further towards the recovery of the 1.2900 level.
daily chart
Additional technical levels
Source: Fx Street
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