- Resurgent USD demand assisted USD/CAD to rally over 100 pips from the 1.3900 mark.
- The technical set-up warrants some caution before placing aggressive directional bets.
The USD/CAD pair rallied over 100 pips from daily swing lows and moved back above the key 1.40 psychological mark. The strong intraday rally was sponsored by resurgent USD demand and accompanied by bullish oscillators on the 1-hourly chart.
Meanwhile, technical indicators on 4-hourly/daily charts maintained their bearish bias. This coupled with a pickup in crude oil prices failed to provide any additional boost or assist the pair to capitalize on the momentum beyond 200-hour SMA.
The pair quickly retreated around 35 pips from the daily swing high. This, in turn, makes it prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move back towards the 1.4080 supply zone.
On the flip side, the 1.3930 level now seems to protect the immediate downside. This is followed by pivotal support near the 1.3900 mark, which if broken might now be seen as a fresh trigger for bearish traders and prompt some technical selling.
The pair then might accelerate the slide further towards challenging its next major support near mid-1.3800s. Some follow-through selling will confirm a bearish break through near-term trading and pave the way for an extension of the pair’s recent pullback.