- A combination of factors drove USD / CAD higher during the first half of the European session.
- The bulls are expecting sustained strength beyond the 1.2585 confluence hurdle and the 23.6% Fibonacci level.
- A convincing break below 1.2500 will set the stage for an extension of the recent slide.
The pair USD / CAD it added to its intraday gains during the first half of the European session and rose to three-day highs around the 1.2585 region in the last hour. A strong positive follow-up move in US Treasury yields continued to act as a tailwind for the US dollar. Aside from this, the ongoing retracement drop in crude oil prices undermined the commodity-pegged Canadian dollar and provided a modest rise to the USD / CAD pair.
From a technical perspective, the bulls are now expecting a sustained move past a confluence hurdle comprising a 200-period SMA on the 4-hour chart and a short-term downtrend line. This is closely followed by the 23.6% Fibonacci level from the last leg of the downside of 1.2949-1.2494. Sustained strength beyond would suggest that the recent corrective decline from annual highs has run its course and has set the stage for a further short-term appreciation move. The USD / CAD pair could then aim to break through an intermediate hurdle near the 1.2635-40 bid zone.
The USD / CAD pair could eventually rise beyond the 38.2% Fibonacci level, around the 1.2565 region, and aims to rebound 1.2600. The positive momentum could extend further towards the next relevant hurdle, around the 1.2620 region, or 50% of the Fibonacci level.
On the other hand, immediate support is pegged near the horizontal level of 1.2555 before the 1.2525-20 region and the key psychological level 1.2500. A convincing break below will be seen as a new trigger for bearish traders and will make the USD / CAD pair vulnerable. The pair could fall towards strong challenging horizontal support near the 1.2430 region before finally dropping to the round 1.2400 level.
4 hour chart
Technical levels
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