- USD/CAD is back near a one-week low amid a new wave of dollar selling.
- The decline in oil prices undermines the loonie and seems to help limit the fall.
- Sustained weakness below the 1.2900 confluence will set the stage for further losses.
The pair USD/CAD has seen an intraday drop from the 1.2955-1.2960 zone and has turned lower for the second day in a row on Friday. The bearish trajectory drags the pair back to the one-week lows hit the previous day, with the bears now expecting sustained weakness below 1.2900.
The US dollar plunges to a new weekly low in reaction to the US consumer price index report, which appears to have dashed expectations of more aggressive rate hikes by the Federal Reserve. This, in turn, is seen to be putting some downward pressure on the USD/CAD pair. That said, a further leg down in crude prices could undermine the commodity-linked loonie and help limit the slide.
Technically, the 1.2900-1.2895 area marks confluence support comprising the Fibonacci 50% retracement level of the 1.2728-1.3063 rally and the 100-period SMA on the 4-hours chart. A convincing break below will be seen as a new trigger for bearish traders and will make the USD/CAD pair vulnerable. The next relevant support lies near the 61.8% Fibonacci level, around the 1.2855 area, which if broken will set the stage for further losses.
On the other hand, the 38.2% Fibonacci level around the 1.2935 area seems to act as an immediate hurdle ahead of the daily high around the 1.2955-1.2960 area. Some follow-up buying should allow the bulls to reclaim the key psychological 1.3000 level. The latter coincides with the 23.6% Fibonacci level, above which the momentum could extend further towards the weekly swing high, around the 1.3060 region, on the way to the 1.3100 round level.
USD/CAD 4-hour chart
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Technical levels
Source: Fx Street
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