USD/CAD Price Analysis: Stage seems set for a move to retest YTD peak, around 1.2900 mark

• USD/CAD attracted some dip-buying on Wednesday and climbed to a fresh multi-week high.
• A combination of factors favour bullish traders and supports prospects for additional gains.
• Any meaningful pullback is likely to be bought into and remain limited near the 1.2700 mark.

The USD/CAD pair shot to its highest level since mid-March on Wednesday, though struggled to capitalize on the move and retreated a few pips from the mid-1.2800s. The pair was last seen trading in neutral territory, around the 1.2830-1.2825 region during the early North American session.

A fresh leg down in crude oil prices undermined the commodity-linked loonie and acted as a tailwind for the USD/CAD pair. Apart from this, the recent US dollar rally remains uninterrupted amid expectations for a more aggressive policy tightening by the Fed. This, in turn, supports prospects for a further near-term appreciating move for the major

From a technical perspective, the overnight strong rally beyond the 61.8% Fibonacci retracement level of the 1.2901-1.2403 downfall was seen as a fresh trigger for bullish traders. The emergence of some dip-buying on Wednesday adds credence to the positive outlook, suggesting that the path of least resistance for the USD/CAD pair is to the upside.

Hence, a subsequent move towards retesting the YTD high, around the 1.2900 mark, remains a distinct possibility. The upward trajectory could further get extended towards the 2021 swing high, around the 1.2960-1.2965 zone, above which bulls might aim to reclaim the key 1.3000 psychological mark for the first time since December 2020.

On the flip side, the daily low, around the 1.2780-1.2775 region, now seems to protect the immediate downside. Any further slide could be seen as a buying opportunity around the 1.2765-1.2755 area. This should limit losses near the 1.2710-1.2700 zone, which if broken decisively could drag spot prices back towards the 50% Fibo. level, around mid-1.2600s.

USD/CAD daily chart

Key levels to watch