- USD/CAD attracted heavy buying on the dips on Tuesday and rose to a fresh multi-week high.
- Aggressive Fed rate hike expectations continued to lift the USD and continued to support the move.
- An intraday bounce in crude oil prices failed to support the loonie or dampen momentum.
The pair USD/CAD rose more than 100 pips from the daily low and spiked to the 1.2800 area, or new six-week highs during the early American session.
Increasing bets for more aggressive policy tightening by the Federal Reserve, coupled with prevailing risk-off sentiment, pushed the safe-haven US dollar to its highest level since March 2020. This, in turn, , was considered a key factor that acted as a tailwind for the USD/CAD pair. The bulls seemed unaffected by an intraday rally in crude oil prices, which tend to support the commodity-linked Canadian dollar.
From a technical perspective, last week’s sustained advance into the 50% Fibonacci retracement level of the 1.2901-1.2403 decline was seen as a new trigger for bullish traders. The appearance of buying on the dips on Tuesday and the acceptance above the 61.8% Fibonacci level adds credence to the constructive outlook. This, in turn, supports the prospects for a further appreciation move.
Therefore, some tracking strength towards the next relevant hurdle, around the 1.2825-1.2830 region, remains a distinct possibility. The positive momentum could extend further and allow the USD/CAD pair to re-target to conquer the 1.2900 round figure, or the yearly high hit in March.
On the other hand, the 1.2740 region now appears to protect the immediate drop ahead of 1.2700, or the 61.8% Fibonacci level. Any further decline could continue to tempt bullish traders near the 1.2685-1.2675 region. This, in turn, should help cap the downside near the 50% Fibonacci level around 1.2650, which should now act as a strong base for the USD/CAD pair.
USD/CAD daily chart
Technical levels
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
