USD/CAD Price Analysis: Looks poised to challenge ascending channel barrier around 1.3400

• A combination of factors pushes USD/CAD to its highest level since November 2020 on Monday.
• The formation of an uptrend channel points to a well-established short-term uptrend.
• The technical setup favors the bulls and supports the prospects for a further appreciation move.

The pair USD/CAD builds on last week’s strong US CPI-inspired rally from around the mid-1.2900 and gains some follow-up traction on Monday. The pair maintains its tone offered in the early American session and is currently sitting just above 1.3300, or the highest level since November 2020.

The US dollar is back in demand amid firm expectations that the Federal Reserve will make a large-scale rate hike at the end of a two-day monetary policy meeting on Wednesday. Aside from this, bearish oil prices continue to undermine the commodity-linked loonie and continue to support the current positive momentum in the USD/CAD pair.

Generally speaking, the recent move higher along a multi-month ascending channel points to a well-established short-term uptrend. This, coupled with last week’s convincing break through the 1.3210-1.3220 supply zone and a subsequent move beyond 1.3300, supports the prospects for further gains.

The constructive setup is reinforced by the fact that the technical indicators on the daily chart have been gaining positive traction and are still far from overbought territory. Therefore, a follow up towards rising channel resistance around 1.3400 is possible.

On the other hand, any significant corrective decline could find decent support near the resistance breakout point of 1.3220-1.3210. Any retracement below 1.3200 could be seen as a buying opportunity and capped near the 1.3160-1.3150 area. The latter should act as a strong USD/CAD base and pivot point.

USD/CAD daily chart

Technical levels