- A combination of factors continued to push USD / CAD higher for the third day in a row.
- A broad-based USD strength, falling oil prices continued to support the strong bullish move.
- The setup supports the prospects for a move towards a retest of the yearly highs, around 1.2950.
The pair USD / CAD It continued to climb higher during the middle of the European session and rose to fresh month-long highs, above 1.2850 in the last hour.
Against the backdrop of expectations of an imminent Fed phase-down announcement, a sell-off in global equity markets provided a strong boost to the safe-haven US dollar. Aside from this, a sharp drop in crude oil prices undermined the commodity-linked Canadian dollar and pushed the USD / CAD higher for the third day in a row.
From a technical perspective, Friday’s sustained advance into a week-long trading range was seen as a key trigger for the bulls and prompted strong follow-up buying on the first day of a new week. Subsequent force beyond the monthly swing highs touched initially and 1.2800 has already set the stage for further gains.
The constructive outlook is reinforced by the fact that the technical indicators on the daily chart have been gaining positive traction and are still far from being in overbought territory. That being said, the RSI on hourly charts already shows intermittent overbought conditions and deserves some caution before placing new bullish bets.
However, the USD / CAD pair appears poised to climb further towards the recovery of the 1.2900 mark en route to yearly highs, around 1.2950 touched on August 20. Concerns that Canada’s federal elections could result in a stalemate could continue to act as a headwind for the national currency and add credibility to the bullish bias.
On the other hand, the pullback below the 1.2830-25 region should find decent support near 1.2800. Any further decline below the 1.2765-60 area should now be seen as a buying opportunity. This, in turn, should help limit the decline of the USD / CAD pair near the break point of the resistance of the trading range, around 1.2700.
4 hour chart
Technical levels
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