- USD/CAD gained traction for the fourth day in a row and rose to a two-week high.
- The pullback in oil prices undermined the loonie and acted as support amidst a stronger dollar.
- A sustained move beyond the 61.8% Fibonacci level will set the stage for further short-term gains.
The pair USD/CAD it was supported by last week’s solid rebound from the 1.2520-1.2515 region, or its lowest level since April 21, and rose for the fourth day in a row on Monday. The momentum lifted prices to a 2 1/2 week high, though it stalled near the 1.2865-1.2870 resistance zone.
Oil prices fell back from three-month highs reached last week and undermined the commodity-linked loonie. Elsewhere, prospects of a more aggressive Federal Reserve interest rate hike to combat stubbornly high inflation, coupled with the risk-off environment, benefited the safe-haven US dollar. The combination of factors continued to act as a tailwind for the USD/CAD pair and continued to support the strong rally.
However, the bulls failed to capitalize on the move and break above the 1.2865-1.2870 supply zone, which coincides with the 61.8% Fibonacci retracement level of the 1.3077-1.2518 drop. The aforementioned barrier should now act as a pivot point, which if broken decisively would lay the groundwork for a further short-term appreciation move. The USD/CAD pair could then accelerate the momentum towards the recovery of the round 1.2900 level.
The bullish trajectory could further extend towards the intermediate resistance of 1.2920-1.2925 towards the 1.2960 region, above which the bulls could aim to conquer the psychological level of 1.3000. Some follow-up buying has the potential to push the USD/CAD pair towards the year’s high around the 1.3075 area hit in May.
On the other hand, the 50% Fibonacci level near 1.2800 seems to protect the immediate downside. Any further decline could be seen as a buying opportunity near the 1.2760 area, which should cap the drop near the 1.2730 area, or the 38.2% Fibonacci level. The latter should act as a strong base for the USD/CAD pair.
USD/CAD daily chart
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Technical levels
Source: Fx Street
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