USD/CAD Price Analysis: Pullback from two-month high could be seen as buying opportunity

• USD/CAD witnessed some selling on Friday and retreated further from the two-month high.
• The set-up still favours bullish trades and supports prospects for the emergence of dip-buying.
• A subsequent decline could find decent support near the 1.2725-20 area and remain limited.

The USD witnessed some selling heading into the early North American session and dragged the USD/CAD pair to a fresh daily low, around the 1.2765 region in the last hour.

The global risk sentiment got a minor lift amid reports that Russia is reportedly ready to send a delegation to Minsk for talks with Ukraine. This, in turn, dented the greenback's safe-haven status and exerted some downward pressure on the USD/CAD pair.

The downside, however, remained limited, at least for now, amid subdued price moves around crude oil prices, which failed to provide any meaningful boost to the commodity-linked loonie. This, in turn, warrants some caution for aggressive bearish traders.

From a technical perspective, the overnight sharp move up to the two-month high confirmed a near-term bullish breakout through a four-week-old trading range. This, along with the fact that technical indicators on the daily chart have just started gaining positive traction, supports prospects for the emergence of some dip-buying around the USD/CAD pair.

Hence, any subsequent decline towards the 1.2730-1.2725 region could still be seen as an opportunity to initiate fresh bullish positions and remain limited near the 1.2700 mark. The next relevant support is pegged near the lower end of the aforementioned trading range, around mid-1.2600s, which should act as a strong near-term base for the USD/CAD pair.

On the flip side, the 1.2800-1.2810 region now seems to act as an immediate resistance. Sustained strength beyond Some follow-through buying beyond the 1.2825-1.2830 area has the potential to push the USD/CAD pair back towards the overnight swing high, around the 1.2875-1.2880 zone. The momentum could further get extended towards reclaiming the 1.2900 mark.

USD/CAD daily chart

Technical levels to watch