USD/CAD Price Analysis: Slides to one-week low, bears flirt with 1.2900 confluence support

• USD/CAD drops to a one-week low on Thursday amid the emergence of fresh USD selling.
• Hawkish Fed expectations to lend support to the USD and the pair amid a dip in oil prices.
• Mixed oscillators on daily/hourly charts warrant some caution for aggressive bearish traders.

The USD/CAD pair meets with a fresh supply on Thursday and continues losing ground through the early part of the European session. Spot prices drop to a one-week low in the last hour, with bearish traders now awaiting a sustained break below the 1.2900 round figure.

The risk-on impulse drags the safe-haven US dollar further away from a two-decade high touched earlier this week and exerts downward pressure on the USD/CAD pair. Bulls seem rather unimpressed by a modest downtick in crude oil prices, which tend to undermine the commodity-linked loonie.

From a technical perspective, the 1.2900 mark represents confluence support, comprising 200-period SMA on the 4-hour chart and the 50% Fibonacci retracement level of the 1.2728-1.3063 rally. This should now act as a pivotal point, which if broken will be seen as a fresh trigger for bears.

Oscillators on the daily chart, meanwhile, have just started drifting into the negative territory and support prospects for an eventual breakdown. That said, RSI (14) on hourly charts is already flashing overstretched conditions and warrants some caution amid hawkish Fed expectations.

This makes it prudent to wait for a convincing break through the said handle before positioning for any further decline. The USD/CAD pair might then accelerate the downfall towards the 1.2855 area (61.8% Fibo. level) en route to the next relevant support near the 1.2830-1.2825 zone.

On the flip side, the 38.2% Fibo. level, around the 1.2935 area, now seems to act as an immediate hurdle. Some follow-through buying beyond the mid-1.2900s could lift the USD/CAD pair towards the 1.2980 region (23.6% Fibo. level) before bulls aim to reclaim the 1.3000 psychological mark.

USD/CAD 4-hour chart

Key levels to watch