- USD/CAD is languishing near a two-week low amid prevailing dollar selling bias.
- Lower oil prices could undermine the loonie and help limit the slide.
- Investors await the Canadian CPI report before making further directional bets.
The pair USD/CAD fell for the fourth day in a row on Wednesday and was last seen near a two-week low just above 1.2850 during the first half of the European session.
The US dollar remained on the defensive amid diminishing bets on a massive 100 basis point rate hike by the Federal Reserve on July 27. This, in turn, was seen as a key factor that continued to act as a headwind for the USD/CAD pair. However, a modest drop in oil prices weakened the commodity-linked loonie and could help limit losses for the USD/CAD pair. Also, investors may want to refrain from making aggressive bets ahead of the Canadian CPI release.
From a technical point of view, the 1.2850 area represents confluence support, comprising the 50-day SMA and the Fibonacci 50% retracement level of the strong rally from 1.2517-1.3223. This should act as a key point for intraday traders and help determine the next leg of a directional move for the USD/CAD pair. A bit of follow-through selling should pave the way for a drop to the 1.2830-1.2820 support on the way to the 1.2800 round level.
A convincing break below the latter would be seen as a new trigger for bearish traders and make the USD/CAD pair vulnerable to accelerating the decline towards the 1.2700 level. The bearish path could extend further towards the next relevant support near the 1.2675-1.2665 horizontal zone.
On the other hand, any significant recovery attempts could now face stiff resistance near 1.2900 ahead of the 1.2925-1.2930 region. This is followed by the 38.2% Fibonacci level around the 1.2960 area, which if broken decisively would suggest that the correction has run its course and pave the way for further gains.
The USD/CAD pair could then aim to break above the psychological 1.3000 mark and retest the 1.3075-1.3085 supply zone, coinciding with the 23.6% Fibonacci level. Positive momentum could lift the pair back above the 1.3100 round figure.
USD/CAD daily chart
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Technical levels
Source: Fx Street
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