The USD/CAD pair is looking to reclaim the psychological resistance of 1.3500 in the early London session. The Loonie asset has rebounded after a mild correction to near 1.3463 amid the recovery move by the US Dollar Index (DXY). The USD Index has refreshed its day’s high at 102.68 as US debt-ceiling issues have deepened further.

There are prospects of a run to test the 1.3500 resistance, considering the price is now on the back side of the prior bearish micro trend. However, if the bears commit to resistance, there will be prospects of a move to restest the now counter-trendline support and the 1.3450s.

On the daily chart, below, such a move would tally with a 50% mean reversion support and below there, a 61.8% Fibonacci area around the 1.3420 and trendline support.

If the bulls commit, then there will be prospects of a move through the daily trendline resistance.

The oil price has dropped sharply as investors are worried about deepening fears of a US recession. Going forward, the oil inventory data by the US Energy Information Administration (EIA) will be keenly watched. It is worth noting that Canada is the leading exporter of oil to the US and lower oil prices impact the Canadian Dollar. 

The USD/CAD is falling sharply for the second day in a row and is approaching the 1.3400 level but we will maintain our hawkish stance above the SL area. A break below this level could expose the next support area seen around 1.3360/70. A daily close below this area could open the door for a test of the monthly low at 1.3310/15.

The immediate resistance for the pair is the 1.3500 area. If the it rallies above this level, it would alleviate the current bearish pressure.

USDCAD seems to be getting ready for bullish run

May 17 2023