- USD/CAD gained traction for the fourth successive day and climbed to over a two-week high.
- Retreating oil prices decimated the loonie and remained supportive amid a stronger USD.
- Sustained move beyond the 61.8% Fibo. level will set the stage for further near-term gains.
The USD/CAD pair built on last week’s solid rebound from the 1.2520-1.2515 region, or its lowest level since April 21 and scaled higher for the fourth successive day on Monday. The momentum lifted spot prices to a two-and-half-week high, though stalled near the 1.2865-1.2870 resistance zone.
Oil prices retreated further from a three-month peak touched last week and decimated the commodity-linked loonie. On the other hand, the prospects for a more aggressive Fed rate hike moves to combat stubbornly high inflation, along with the risk-off mood, benefitted the safe-haven US dollar. The combination of factors continued acting as a tailwind for the USD/CAD pair and remained supportive of the strong move up.
Bulls, however, struggled to capitalize on the move or make it through the 1.2865-1.2870 supply zone, which coincides with the 61.8% Fibonacci retracement level of the 1.3077-1.2518 downfall. The mentioned barrier should now act as a pivotal point, which if cleared decisively would set the stage for a further near-term appreciating move. The USD/CAD pair might then accelerate the momentum towards reclaiming the 1.2900 round figure.
The upward trajectory could further get extended towards the 1.2920-1.2925 intermediate resistance en-route the 1.2960 region, above which bulls could aim to conquer the 1.3000 psychological mark. Some follow-through buying has the potential to push the USD/CAD pair towards the YTD peak, around the 1.3075 area touched in May.
On the flip side, the 50% Fibo. level, near the 1.2800 mark, seems to protect the immediate downside. Any subsequent slide could be seen as a buying opportunity near the 1.2760 region, which should limit the downside near the 1.2730 area, or the 38.2% Fibo. level. The latter should act as a strong base for the USD/CAD pair.
USD/CAD daily chart
Key levels to watch