USD/CAD bulls take over to safeguard against a move towards April 21 lows

• USD/CAD correcting the latest thrust to the downside from the channel lows.
• Bears are otherwise seeking to mitigate until 1.2458 which could be exploited. 

At 1.2552, USD/CAD is higher by some 0.2% at the time of writing, recovering from fresh cycle lows posted earlier in the day of 1.2517 as the US dollar emerges as the top performer again vs commodity-FX for the US session so far. 

DXY is up 0.17% to 102.50, trading between the lows and highs of the day, 102.269/102.776. US equities are sinking in midday trade and the US 1-year auction hit a high yield of 3.03% on Wednesday, up from the 2.943% high in the previous auction. We have seen a subsequent rally in US yields and the 10-year now stands 1.54% higher on the day, supporting the greenback ahead of key macro events, that include the European Central Bank, US inflation data Friday and Canadian central bank updates and jobs data. 

Canada's employment report for May could help guide expectations for the pace of Bank of Canada interest rate hikes. However, the main focus will very much stay with this theme for the end of the week with the BoC's Financial Stability Report which is expected to shine a light on risks and vulnerabilities to the financial system. Analysts at TD Securities said that they ''do not expect any implications for the near-term policy outlook.''

''We will be watching for any new detail on high-leverage borrowers or mortgage delinquencies, but expect an overall message that the financial system remains resilient amid a rising interest rate environment.''

 We'll also hear from Governor Macklem on Thursday. Last week, the BoC hiked its benchmark rate by half a percentage point for a second straight time to tackle soaring inflation. in this regard, Reuters reported that ''prices in Canada are rising at their quickest pace in 31 years, but that is not yet feeding into a wage spiral, Canada's budgetary watchdog said on Tuesday, with inflation still expected to return to target in coming years.''

USD/CAD technical analysis 

The price is correcting the latest thrust to the downside from the channel lows. However, there is still a price imbalance that the bears are seeking to mitigate until April 21 lows, 1.2458, which could be exploited. With that being said, the price is headed towards a long term support area. Should the bulls commit to the correction, a break of resistance and if the 61.8% Fibonacci fails to draw in supply, then there will be prospects of a deeper correction towards 1.26 the figure and possibly beyond.