- USD/CAD is under new selling pressure and weighed down by a combination of factors.
- The rally in oil prices underpins the Loonie and puts pressure on amid broad-based USD weakness.
- Mixed technical indicators warrant some caution before making aggressive directional bets.
The pair USD/CAD meets a new offer on Tuesday and extends the previous day’s pullback from the vicinity of the 1.3500 psychological signal, or more than a 1-week high. The pair remains depressed during the early American session and is currently trading around the round 1.3400 level, just a few pips above the daily low.
The US dollar comes under renewed selling pressure and halts its rally momentum from the 3-month low, which in turn acts as a headwind for the USD/CAD pair. Increasing bets on smaller Fed rate hikes drag down US Treasury yields, which, coupled with a positive risk tone, weighs on the safe-haven dollar sure.
Apart from this, an intraday rally in crude oil prices underpins the commodity-linked Loonie and also contributes to the offered tone surrounding the USD/CAD pair. That being said, concerns about the worsening COVID-19 situation in China should curb optimism in the markets. This should limit further losses for the USD and major pairs.
From a technical point of view, the overnight failure near a breakout point of horizontal support has turned into resistance, and the subsequent slide favors the bears. Furthermore, the oscillators on the daily chart have been struggling to gain any significant positive traction. That being said, bullish resistance below the 1.3400 sign warrants some caution.
Therefore, it will be prudent to wait for strong follow-through selling before confirming that the recent bounce from the 100-day SMA support has been exhausted. In the meantime, any further decline is likely to find support near the 1.3330-1.3325 zone before the 1.3300 level, which if broken decisively will shift the bias in favor of the bears.
On the other hand, the high of the daily candle, around the 1.3455 zone, seems to act as an immediate obstacle. Further sustained strength should allow the USD/CAD pair to make another attempt to conquer the 1.3500 signal. Momentum could take the pair to resistance at the 50-day SMA, currently around the 1.3550-1.3555 zone.
USD/CAD daily chart
Key levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
