- USD/CAD consolidates its recent strong gains to its highest level since early June.
- Rising Oil prices underpin the Loonie and caps gains amid subdued USD demand.
- The recent breakout through the 200-day SMA and the 1.3500 mark favours bulls.
The USD/CAD pair lacks any firm intraday directional bias on Monday and oscillates in a narrow trading band below mid-1.3400s through the Asian session. Spot prices, meanwhile, remain well within the striking distance of the highest level since early June touched on Friday and seem poised to prolong the recent upward trajectory witnessed since the beginning of this month.
Crude Oil prices gain some positive traction for the third successive day and underpin the commodity-linked Loonie. This, along with subdued US Dollar (USD) price action, contributes to acting as a headwind for the USD/CAD pair. That said, elevated US Treasury bond yields, bolstered by rising bets for one more 25 bps lift-off by the Federal Reserve (Fed) in 2023, assist the USD to stand tall near its highest level in more than two months. Apart from this, looming recession fears support prospects for a further appreciating move for the safe-haven buck and validates the positive outlook for the major.
From a technical perspective, the Relative Strength (RSI) on the daily chart hovers above the 70 mark, flashing slightly overbought conditions and holding back bulls from placing fresh bets around the USD/CAD pair. That said, last week's sustained breakout through the very important 200-day Simple Moving Average (SMA) resistance near the 1.3450 area was seen as a fresh trigger for bullish traders. Moreover, a subsequent move and acceptance beyond the 1.3500 psychological mark validate the constructive outlook. This, in turn, suggests that the path of least resistance for spot prices is to the upside.
It, however, will still be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further gains. Nevertheless, the USD/CAD pair seems poised to surpass Friday's swing high, around the 1.3575 region, and aim to reclaim the 1.3600 mark for the first time since May. The positive momentum could get extended further towards the next relevant barrier near the 1.3655-1.3660 supply zone.
On the flip side, any meaningful corrective decline is more likely to attract fresh buyers near the 1.3500 mark. This should help limit the downside for the USD/CAD pair near the 1.3450 area, or the 200-day SMA. The latter should act as a strong base, which if broken decisively might prompt aggressive technical selling and expose the 1.3400 round figure before spot prices eventually drop to test the 1.3370 support zone.
USD/CAD daily chart
Setup favours bulls and supports prospects for further gains appeared first at: Source