USD/CAD Price Analysis: Climbs to fresh YTD top, descending trend-line breakout in play

• USD/CAD gained traction for the second straight day and climbed back closer to the YTD peak.
• Sliding crude oil prices undermined the loonie and extended support amid modest USD strength.
• Move beyond the 1.2900 mark favours bullish traders and supports prospects for further gains.

The USD/CAD pair built on Friday's strong intraday rally from the 1.2720-1.2715 region and climbed to its highest level since March 9 during the early North American session on Monday. The emergence of fresh selling around crude oil undermined the commodity-linked loonie. This, along with the underlying bullish sentiment surrounding the US dollar, acted as a tailwind for spot prices for the second successive day.

From a technical perspective, spot prices are now looking to extend the momentum further beyond a downward-sloping trend-line extending from December 2021 swing high. Move beyond the previous YTD top, around the 1.2900 mark, now seems to have confirmed a fresh bullish breakout and supports prospects for additional gains. The USD/CAD pair could now appreciate further and test the 2021 peak, around the 1.2665 region touched in December.

That said, RSI (14) on the daily chart have moved on the verge of breaking into overbought territory and warrants some caution ahead of this week's key event/data risks. The Fed is scheduled to announce its monetary policy decision on Wednesday. This will be followed by the closely watched monthly jobs report from the US (NFP) and Canada, which will play a key role in determining the near-term trajectory for the USD/CAD pair.

In the meantime, any meaningful pullback now seems to find some support near the 1.2860-1.2855 region ahead of the daily low, around the 1.2830 area. This is followed by the 1.2800 round-figure mark, which if broken decisively will negate the positive outlook and prompt aggressive technical selling around the USD/CAD pair. The downward trajectory could then accelerate towards the 1.2720-1.2715 area en-route the 1.2700 round-figure mark.

Some follow-through selling would pave the way for a fall towards testing the 1.2650-1.2640 region. The latter marks a horizontal resistance breakpoint and coincides with the very important 200-day SMA, which, in turn, should act as a strong base for the USD/CAD pair and a key pivotal point.

USD/CAD daily chart

Key levels to watch