- USD/CAD attracts some buying on the dips near the 1.3630 area, though there is no follow through.
- Positive oil prices underpin the loonie and act as a headwind amid overbought RSI(14).
- The situation favors the bulls and supports the prospects for a further appreciation move.
The pair USD/CAD recovers much of its intraday losses and rises back above 1.3700 during the early American session.
Expectations of a more aggressive Fed policy tightening help the US dollar attract some downside buying and offer some support to the USD/CAD pair. That said, the boost in risk appetite, coupled with a softer tone around US Treasury yields, seems to cap safe-haven dollar gains. Also, a nice recovery in crude oil prices is underpinning the commodity-linked loonie and acting as a headwind for the pair.
From a technical point of view, the strong rally overnight to the highest level since May 2020 saw spot prices break through the top end of a two-week-long ascending channel. This could be considered a key factor for bullish traders. That said, the RSI (14) on the daily chart is showing overbought conditions and warrants some caution, so it is prudent to wait for a short-term consolidation before positioning for any further appreciation moves.
However, the setup still suggests that the path of least resistance for the USD/CAD pair is to the upside. Therefore, a move back towards the intermediate hurdle at 1.3745-1.3750, on the way to the 1.3800 signal, remains a distinct possibility. Some follow-up buying should pave the way for further gains and an extension of the recent strong rally seen in the last two weeks or so.
On the other hand, the low around the 1.3630 area seems to protect the immediate downside. Any drop below 1.3600 could be seen as a buying opportunity and find decent support near the lower end of the mentioned trend channel, currently around the 1.3565 region. A convincing break below would nullify the positive outlook and set the stage for a deeper corrective decline.
USD/CAD 4-hour chart
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Key levels to watch
Source: Fx Street
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