The USD/CAD pair lacked any firm directional bias on Tuesday and oscillated in a narrow trading band, below the 1.2400 mark through the early European session.

The pair, so far, has struggled to capitalize its recent bounce from four-month lows touched last week and remained capped near the 1.2400 mark, though a combination of factors acted as a tailwind. A modest pullback in crude oil prices from multi-year tops undermined the commodity-linked loonie. This, along with a pickup in the demand for the US dollar, extended some support to the USD/CAD pair. Crude oil, a key Canadian export, retreated from fresh 7-year highs, which  pushed the loonie lower against the USD. In addition to that, a Reuters poll reported that the Bank of Canada (BoC) will raise interest rates as early as Q3, 2022, at least three months earlier than previously expected. The Market is  already pricing in the first hike as early as April.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

The Loonie pair’s pullback portrays a bearish chart pattern, namely rising wedge, on the hourly play. The same joins downward sloping RSI line to highlight the 200-HMA level of 1.2362 as immediate support.

However, the quote’s weakness past 1.2362 needs validation from the stated wedge’s support line, near 1.2355 by the press time, a break of which will direct the USD/CAD bears towards the monthly low of 1.2288 before pressuring the prices towards late June’s low of 1.2252. Alternatively, recovery moves remain less important below the wedge’s resistance line, close to the 1.2400 threshold at the latest.

Also challenging the short-term USD/CAD recovery is the October 18 top of 1.2410 and 61.8% Fibonacci retracement of October 12-21 declines, near 1.2420.

Overall, USD/CAD remains on the back foot and hence confirmation of the rising wedge will add strength to the bearish impulse. 

USDCAD

Oct 26 2021