The USD/CAD currency pair has recently pulled back from a multi-year peak, though analysts suggest that further declines may be limited. The upward trajectory in oil prices has provided support for the Canadian Dollar (CAD), while simultaneously placing downward pressure on the currency pair. Technical indicators hint at the possibility of dip-buyers entering the market.
During the Asian trading session on Wednesday, the USD/CAD pair experienced a slight decline but remained anchored near its highest point since April 2020. Currently trading just above the mid-1.4100s, the pair saw a decrease of less than 0.10% for the day. Traders are closely monitoring upcoming data on US consumer inflation as well as the Bank of Canada’s policy announcements before making any significant moves.
Rising crude oil prices are benefiting the CAD and adding pressure on the USD/CAD pair. However, expectations for a potential rate cut by the Bank of Canada may temper enthusiasm for buying the commodity-linked currency. Concurrently, the growing sentiment that the Federal Reserve will maintain a cautious approach regarding interest rate reductions is aiding the US Dollar (USD) in retaining its recent gains, which in turn supports the USD/CAD pair.
From a technical analysis standpoint, the recent breakout above the 1.4100 level is regarded as a key bullish signal. Oscillators on the daily chart remain comfortably in positive territory without showing signs of being overbought, indicating that the path forward for the USD/CAD pair still favors upward movement. Any subsequent dips are likely to be seen as buying opportunities, with strong support expected around the 1.4100 handle.
If selling pressure were to push the pair below the support level of 1.4070, it could trigger further declines toward the 1.4020 region, eventually approaching the psychological level of 1.4000. In contrast, the resistance at 1.4200 remains significant, and surpassing this mark could lead to additional gains, potentially reaching 1.4260 and the swing high of 1.4300 seen in April 2020. Further upside could extend the pair into the 1.4335-1.4340 range.
