- USD/CAD trimmed some of its intraday gains amid a modest dollar pullback from a 20-year high.
- Aggressive bets on Fed rate hikes and risk-off sentiment should limit dollar losses and lend support.
- Falling oil prices weighed on the loonie and acted as a tailwind for the pair.
The pair USD/CAD struggled to break through intermediate resistance near 1.3050 and has now trimmed some of its intraday gains. Spot prices fell back to the 1.3020-1.3015 area during the early American session, although the short-term bias seems to continue to favor the bulls.
The further decline in US Treasury yields triggered profit-taking in the dollar after earlier rallying to a new two-decade high. However, the Fed’s aggressive rate hike bets, coupled with the prevailing risk-off mood, helped limit any deeper dollar pullback and should act as a tailwind for the USD/CAD pair.
On the other hand, the sharp decline in oil prices undermined the commodity-linked loonie and supports the prospect of some buying around the USD/CAD pair. The black liquid was weighed down by fresh COVID-19 cuts in China, which, coupled with recession fears, have raised concerns about the outlook for fuel demand.
From a technical point of view, the 1.3050 area could continue to act as an immediate headwind before hitting the yearly high around the 1.3080-1.3085 region. This zone is followed by close to 1.3100, which if breached decisively would be seen as a new trigger for the bulls and set the stage for a further short-term appreciation move.
The USD/CAD pair would then try to overcome an intermediate barrier near the 1.3155-1.3160 ​​region and accelerate the momentum towards the 1.3200 mark. The bulls could finally lift the pair to the next relevant resistance near the 1.3270 area.
On the other hand, weakness below the psychological 1.3000 mark could be seen as a buying opportunity and capped near the 1.2940-1.2935 support zone. This zone represents the 100-period SMA on the 4-hour chart and should act as a pivot point, which if broken could trigger an aggressive technical sell.
The next relevant support lies near 1.2900, which if broken decisively would negate any short-term positive bias and make the USD/CAD pair vulnerable. The ensuing drop has the potential to drag cash prices back towards the test of monthly lows, around the 1.2835 region, en route to the 1.2820-1.2815 support zone.
USD/CAD 4-hour chart
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Technical levels
Source: Fx Street
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