The USD/CAD currency pair extended its upward trajectory for the fifth consecutive day on Tuesday, trading above the mid-1.3700s during the Asian session and nearing a six-week high reached the previous day.
Oil Price Decline and USD Dynamics
The recent decline in Crude Oil prices, which have fallen to a one-month low, is a significant factor weakening the commodity-linked Canadian Dollar (Loonie) and providing support to the USD/CAD pair. Despite some selling pressure on the US Dollar (USD) due to ongoing speculation about a potential Federal Reserve (Fed) interest rate cut in September, the USD/CAD pair continues its ascent.
Technical Analysis
From a technical standpoint, the pair’s overnight breakout and close above the 1.3740 resistance zone signals a bullish trend. Daily chart oscillators remain in positive territory and are not yet overbought, reinforcing the positive outlook and suggesting that the path of least resistance is upwards.
A sustained move beyond the 1.3775 level, marking the multi-week high set on Monday, would further confirm the bullish sentiment and enable the pair to aim for the 1.3800 threshold. Continued momentum could drive the USD/CAD pair towards the year-to-date (YTD) peak near 1.3845, last seen on April 16.
Potential Downside
Conversely, any dip below the 1.3740 resistance area is expected to attract fresh buying interest and should be contained around the 1.3700 level. A decisive break below this round figure might trigger technical selling, potentially dragging the USD/CAD pair towards the 100-day Simple Moving Average (SMA) support, currently situated around the 1.3655 region. This level is anticipated to serve as a critical support point.
In summary, the USD/CAD pair remains buoyed by weakening oil prices and persistent bullish technical indicators, with the potential to climb higher if key resistance levels are breached. Conversely, a drop below the pivotal support levels could see the pair facing renewed selling pressure.
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