- USD / CAD gains strong continuation traction for the second day in a row.
- The USD extends post-IPC gains and continues to support the pair’s bullish momentum.
- The fundamental and technical setup looks strongly tipped in favor of the pair’s bulls.
The pair USD / CAD has continued to move higher during Thursday’s European session and has skyrocketed to new five-week highs, around the 1.2530-35 region in the last hour.
The pair attracted some buying near the 1.2460-55 region on Thursday and built on the positive move following the previous day’s US CPI of more than 115 pips from levels below 1.2400. US consumer prices in October rose at the fastest annual pace since 1990, bolstering expectations of an early tightening of monetary policy by the Fed. This, in turn, continued to act as a tailwind for the US dollar, which rose to new yearly highs and helped the USD / CAD pair gain traction for the second day in a row.
Secondly, a softer tone around crude prices weighed on the CAD, a currency pegged to commodity prices, and provided an additional boost to the USD / CAD pair. Apart from this, the rebound could also be attributed to some technical buying after a sustained move past the very important 200-day SMA. That said, relatively thin liquidity conditions, due to the bank holiday in the United States and Canada, could prevent the bulls from opening aggressive new positions and limit any further gains in the pair.
However, the fundamental backdrop appears to tilt firmly in favor of the bulls and supports prospects for an extension of the current positive move. Even from a technical perspective, the USD / CAD pair is flirting with resistance marked by the upper bound of a three-week-old rising channel. A sustained strength po above this region will reaffirm the positive outlook and pave the way for additional gains and aim to regain the round 1.2600 level.
USD / CAD technical levels
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