The USD/CAD pair dipped slightly during the Asian session on Wednesday but remained near its highest level since April 2020, trading just above the mid-1.4100s. The pair is down less than 0.10% for the day as traders await the release of US consumer inflation data and the Bank of Canada’s (BoC) upcoming policy decision, which are likely to influence market sentiment and shape the next direction for the currency pair.
Rising Crude Oil prices provided some support to the Canadian Dollar (CAD), which is traditionally sensitive to oil price fluctuations, putting modest pressure on the USD/CAD pair. However, expectations of a potential BoC rate cut continue to hold back traders from placing aggressive bullish bets on the CAD. At the same time, growing market consensus that the Federal Reserve (Fed) will maintain a cautious stance on cutting rates has helped the US Dollar (USD) preserve its recent gains, acting as a tailwind for the USD/CAD pair.
Technical Outlook: Bullish Bias Remains Intact
From a technical standpoint, the recent breakout and sustained move above the 1.4100 level has been a key bullish signal for traders. Daily oscillators remain firmly in positive territory, still well away from overbought conditions, indicating that the path of least resistance for USD/CAD is likely to remain upward. As a result, any near-term pullback could be seen as a buying opportunity, with the 1.4100 level now acting as a key support zone.
A break below the 1.4070 support could trigger further weakness, potentially sending the pair toward the 1.4020 area and the psychological 1.4000 level. A deeper corrective pullback might extend towards the next support zone around 1.3960-1.3950, with the November 25 low near 1.3925 coming into focus.
Resistance Levels: 1.4200 and Beyond
On the upside, the 1.4200 level continues to serve as immediate resistance, with the next hurdle at 1.4260. A decisive break above this level could propel USD/CAD to test the April 2020 swing high around 1.4300. Beyond that, the pair could extend its gains toward the 1.4335-1.4340 region.
Traders are likely to remain cautious ahead of the US CPI and BoC decisions, as these events could significantly impact the USD/CAD pair’s near-term direction.
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