Rises to the 1.2180 region, at new one-month highs

• A modest pickup in USD demand pushes USD / CAD to new one-month highs.
• The appearance of some buying near the 1.2130 zone supports the prospects for additional earnings.
• A sustained break below the 1.2100 level would negate any constructive near-term prospects.

The USD / CAD pair has recovered more than 50 pips from the lows of the European session on Tuesday and has risen to new highs in a month, around the 1.2180 region in the last hour.

Expectations of a slightly less pessimistic Fed have largely offset a further decline in US Treasury yields and acted as a tailwind for the US dollar. This, in turn, has been seen as a key factor behind the latest surge in the last hour. The rally did not appear to be affected by rising crude prices, which tend to prop up the CAD, a currency pegged to commodity prices.

From a technical perspective, the USD / CAD pair has captured buying near a previous horizontal resistance break point, now turned into support near the 1.2130 region. This should now act as a key fundamental point for short-term investors and help determine the next directional move.

Meanwhile, the technical indicators on the daily chart have just started to move into the positive territory, supporting the prospects for additional gains. Some continuing strength beyond the 1.2180 region will reaffirm the constructive outlook and push the USD / CAD towards the 1.2200 level on its way to the next relevant hurdle near the 1.2265-70 region.

On the other hand, the 1.2130 region could continue to defend the immediate drop. Further down, the next support is at the 1.2100 region, which if decisively broken will negate any short-term positive bias. The USD / CAD pair could then become vulnerable and accelerate the slide towards the key psychological level of 1.2000, the lowest level since May 2015 touched earlier this month.

USD / CAD 4-hour chart

USD / CAD technical levels