- A combination of factors attracted fresh selling around USD/CAD on Thursday.
- Rising oil prices underpinned the loonie and put pressure on amid a weaker dollar.
- A sustained break below the 50% Fibonacci level will set the stage for further losses.
The pair USD/CAD trimmed modest intraday gains and fell to a fresh daily low around 1.2800 during the early American session.
The risk appetite boost weighed on the US dollar amid speculation that the Federal Reserve could pause the rate hike cycle later this year. On the other hand, a nice rally in crude oil prices underpinned the commodity-linked loonie and attracted some intraday selling around the USD/CAD pair.
From a technical point of view, prices have so far struggled to find acceptance above the 38.2% Fib retracement level of the strong move up 1.2459-1.3077. Apart from this, the repeated failures before 1.2900 favor bearish traders and support the prospects for the recent pullback from the year’s high to extend.
That said, it will still be prudent to wait for some selling below the 50% Fib level, around the 1.2770-1.2765 region, before positioning for a further drop. The USD/CAD pair could then accelerate the decline towards intermediate support at 1.2720-1.2715 before finally falling to levels below 1.2700, or the 61.8% Fibonacci level.
On the other hand, the maximum of the daily swing, around 1.2850, which coincides with the Fibo. At 38.2%, it now seems to act as an immediate headwind ahead of the weekly high around the 1.2885 region. Follow-up buying leading to a further move above 1.2900 will negate bearish views and trigger a short-covering rally.
The momentum could carry the pair beyond the 1.2930 area, or the 23.6% Fibonacci level, and allow the USD/CAD pair to reclaim the key psychological 1.3000 level. The next relevant resistance lies near the recent daily closing high around the 1.3045-1.3050 area, ahead of the yearly high around the 1.3075 area.
USD/CAD daily chart
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Technical levels
Source: Fx Street
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