USD/CAD Price Analysis: Fakeout drags loonie below 1.3400

• USD/CAD has slipped below the 20-period EMA amid risk-on mood and the higher oil price.
• Fed Powell’s hawkish commentary failed to infuse blood into the safe-haven assets.
• A Fakeout of the Falling Channel pattern has trimmed demand for the US Dollar.

The USD/CAD pair has dropped vertically below the crucial support of 1.3400 in the early Tokyo session. The Loonie asset is facing immense pressure amid a decline in the US Dollar Index (DXY) and a sheer recovery in the oil price. The USD Index showed immense volatility despite Federal Reserve (Fed) chair Jerome Powell favors for a continuation of interest rate hikes after a stronger-than-expected January United States Nonfarm Payrolls (NFP) report.

Risk-perceived assets like S&P500 settled Tuesday’s session on a bullish note supported by tech-savvy stocks, portraying that the risk appetite theme is in traction. The alpha generated by 10-year US Treasury bonds has surged to near 3.68%.

USD/CAD sensed the presence of sheer selling pressure after an attempt of delivering a breakout of the Falling Channel chart pattern on a two-hour scale. The formation of a Fakeout pushed the asset below the 20-period Exponential Moving Average (EMA) around 1.3414, which indicates that the short-term trend is bearish.

The Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-80.00, which indicates that the bullish view has been negated for now.

The bullish view for the US Dollar was negated after a failure in delivering a Falling Channel breakout, which has exposed the loonie for a downside till January 3 low at 1.3321 and February 2 low at 1.3262 as the asset has slipped below the round-level support of 1.3400.

In an alternative scenario, a break Above February 7 high at 1.3469 will drive the asset toward January 19 high at 1.3521 followed by January 6 low at 1.3538.

USD/CAD two-hour chart