- USD/CAD gains some positive traction on Thursday and moves away from post-BoC lows.
- The descending channel formation warrants caution for bulls amid bearish technical indicators.
USD/CAD has built on the previous day’s late bounce from the 1.2300 level, or weekly lows, and gained some positive traction on Thursday. The pair has rallied to the 1.2380 region during the early part of the European session. And additionally has now recovered a significant portion of the post-BoC losses.
An extension of the corrective pullback in crude oil prices has weighed on CAD
Crude oil prices correcting further have weighed on the CAD, a currency linked to commodity prices. Additionally have contributed to a modest gain for the USD/CAD pair. On the other hand, a nice rally in US Treasury yields has offered some support to the US dollar . And has continued to support the pair’s positive intraday movement.
In reaction to Wednesday’s more upbeat Bank of Canada meeting. The recent recovery from four-month lows has stalled near the upper end of a bearish channel. Investors should view the aforementioned barrier, currently around 1.2410, as a crux as they await the US Q3 advance GDP report.
Meanwhile, oscillators have been gaining positive traction lately and favor intraday bulls. While technical indicators on the daily chart have been recovering, they remain bearish. As a result, it is prudent to wait for a convincing break through channel resistance before positioning for further gains.
USD/CAD could accelerate momentum towards challenging the very important 200-day SMA
The USD/CAD is likely to accelerate momentum above the aforementioned barrier towards challenging the very important 200-day SMA around the psychologically important level of 1.2500. Continuation buying will signal the decline from September monthly highs is over and will lead to a new round of short covering around the pair.
On the other hand, the horizontal zone of 1.2340 seems to be defending the decline ahead of the 1.2300 level. Defending these support levels will be seen as a new trigger for the bearish and make the USD/CAD pair vulnerable to a break below the round 1.2300 level. The bearish move could extend towards the channel support around the 1.2220 region.