- A combination of factors helped the USD / CAD gain traction for the second day in a row.
- The formation of an ascending channel supports the prospects for additional short-term earnings.
- The bulls are now waiting for a sustained move beyond the 1.2625-30 bid zone for further momentum.
The pair USD / CAD it drew some buying on dips near the 1.2580 confluent support and turned positive for the second straight session on Tuesday. Momentum pushed the pair towards the 1.2625-30 resistance zone, or the two-week highs touched last Thursday.
The optimistic US economic outlook continued to underpin the US dollar, which received an additional boost from a sharp rise in US Treasury yields. Apart from this, a further downward leg in prices. Crude oil weighed on the commodity-linked Canadian dollar and continued to support the offered tone surrounding the USD / CAD pair.
Looking at the technical picture, the pair has been trending up along an upward sloping channel for the last week or so. The setup points to a short-term bullish trend and supports the prospects for additional earnings. Positive technical indicators on hourly / daily charts add credibility to the constructive outlook.
With that said, the bulls could still wait for sustained strength beyond the 1.2625-30 region before placing new bets. The USD / CAD pair could accelerate the move to challenge the trend channel resistance, currently near the 1.2660-65 region. Some subsequent purchases will be seen as a new trigger for bull traders.
The momentum could push the USD / CAD pair further towards the 1.2700 mark en route to the next big hurdle near the 1.2735-40 bid zone. The latter coincides with the monthly swing highs, which if decisively cleared will set the stage for an extension of the recent strong recovery move from the multi-year lows hit on March 18.
On the other hand, declines towards the 1.2580 region could still be seen as a buying opportunity. This is followed by strong horizontal support near the 1.2565 level, which if decisively broken will negate the bullish outlook. The subsequent sell could drag the USD / CAD pair towards the key psychological level of 1.2500.
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