- A combination of factors assisted USD/CAD to gain traction for the second straight day.
- The formation of an ascending channel supports prospects for additional near-term gains.
- Bulls now await a sustained move beyond the 1.2625-30 supply zone for a fresh impetus.
The USD/CAD pair attracted some dip-buying near the 1.2580 confluence support and turned positive for the second consecutive session on Tuesday. The momentum pushed the pair back closer to the 1.2625-30 resistance zone, or two-week tops touched last Thursday.
The upbeat US economic outlook continued underpinning the US dollar, which got an additional boost from a sharp spike in the US Treasury bond yields. Apart from this, a fresh leg down in crude oil prices weighed on the commodity-linked loonie and remained supportive of the bid tone surrounding the USD/CAD pair.
Looking at the technical picture, the pair has been trending higher along an upward sloping channel over the past one week or so. The set-up points to a short-term bullish trend and supports prospects for additional gains. Positive technical indicators on hourly/daily charts add credence to the constructive outlook.
That said, bulls might still wait for a sustained strength beyond the 1.2625-30 region before placing fresh bets. The USD/CAD pair might then accelerate the move towards challenging the trend-channel resistance, currently near the 1.2660-65 region. Some follow-through buying will be seen as a fresh trigger for bullish traders.
The momentum might then push the USD/CAD pair further towards the 1.2700 mark en-route the next major hurdle near the 1.2735-40 supply zone. The latter coincides with monthly swing highs, which if cleared decisively will set the stage for an extension of the recent strong recovery move from multi-year lows touched on March 18.
On the flip side, dips towards the 1.2580 region might still be seen as a buying opportunity. This is followed by strong horizontal support near the 1.2565 level, which if broken decisively will negate the bullish outlook. The subsequent selling might then drag the USD/CAD pair back towards the key 1.2500 psychological mark.
USD/CAD 1-hourly chart
Technical levels to watch
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