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Wednesday, November 30, 2022

USD/CAD Price Analysis: New YTD climbs to the top, descending trend-line breakout in play

  • USD/CAD has gained traction for the second straight day and the YTD climbed back closer to the peak.
  • The fall in crude oil prices weakened the loonie and extended support amid a marginal strengthening of the dollar.
  • A move beyond the 1.2900 mark favors bullish traders and supports the prospects for further gains.

The USD/CAD pair built on a strong intraday rally from Friday’s 1.2720-1.2715 zone and climbed to its highest level since March 9 during the opening North American session on Monday. The emergence of fresh selling around crude weakened the commodity-linked loonie. This, along with the underlying bullish sentiment around the US Dollar, acted as a tailwind for the spot prices for the second day in a row.

From a technical perspective, spot prices are now looking to extend the momentum further from the December 2021 swing high to a downward sloping trend-line. A move up from the previous YTD top around the 1.2900 mark, now confirms a new bullish breakout and supports prospects for additional gains. The USD/CAD pair may now move further and test the peak of 2021, having touched the area around 1.2665 in December.

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That said, the RSI (14) on the daily chart is on the verge of breaking into overbought territory and some caution is needed before this week’s major event/data risks. The Fed is due to announce its monetary policy decision on Wednesday. This will be followed by a closely watched monthly jobs report from the US (NFP) and Canada, which will play a key role in determining the near-term trajectory for the USD/CAD pair.

Meanwhile, any meaningful pullback is now finding some support near the 1.2860-1.2855 area, from daily lows near the 1.2830 area. This is followed by the 1.2800 round-figure mark, which if decisively broken out will negate the positive outlook and encourage aggressive technical selling around the USD/CAD pair. The downward trajectory may accelerate towards the 1.2720-1.2715 zone, en route to the 1.2700 round-figure mark.

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Some follow-through sales will pave the way for a downside test in the 1.2650-1.2640 area. The latter marks a horizontal resistance break point and coincides with the very important 200-day SMA, which, in turn, should act as a strong base and a major critical point for the USD/CAD pair.

USD/CAD Daily Chart

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