USD/CAD Price Analysis: Bulls retain control near multi-month high, around 1.3700 mark

• USD/CAD retreats a few pips from over a six-month high touched earlier this Tuesday.
• Rebounding Oil prices and a modest USD pullback from the YTD top act as a headwind.
• The fundamental backdrop and technical setup seem tilted in favour of bullish traders.

The USD/CAD pair gains positive traction for the third straight day on Tuesday and climbs to its highest level since late March, albeit retreats a few pips during the first half of the European session. Spot prices currently trade with modest intraday gains, around the 1.3700 mark, though the fundamental backdrop supports prospects for a further near-term appreciating move.

A modest recovery in the equity markets prompts some profit-taking around the safe-haven US Dollar (USD). Apart from this, rebounding Crude Oil prices underpin the commodity-linked Loonie and act as a headwind for the USD/CAD pair. That said, rising bets for further policy tightening by the Federal Reserve (Fed) should limit any meaningful USD corrective decline. This, along with firming expectations that the Bank of Canada (BoC) is finished hiking interest rates, validates the near-term positive outlook for the major.

From a technical perspective, the recent solid rebound from the vicinity of the 100-day Simple Moving Average (SMA), around the 1.3400 mark, and the subsequent move up favours bullish traders. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the USD/CAD pair is to the upside. Some follow-through buying beyond the daily high, around the 1.3715 area, will reaffirm the constructive outlook.

Spot prices might then surpass an intermediate hurdle near the 1.3755-1.3760 region and aim to reclaim the 1.3800 round-figure mark. The upward trajectory could get extended further and allow the USD/CAD pair to challenge the YTD peak, around the 1.3860 area touched on March 10.

On the flip side, the Asian session low, around mid-1.3600s, should protect the immediate downside ahead of the 1.3610-1.3600 horizontal support. The latter should act as a key pivotal point for short-term traders, which if broken decisively might prompt some technical selling and pave the way for deeper losses. The corrective decline might then drag the USD/CAD pair further below mid-1.3500s intermediate support, towards testing the 1.3500 psychological mark. The 1.3465 area, however, is likely to limit any further near-term losses.

That said, a convincing break below the latter will expose the 1.3400 support, or the 100-day SMA, which if broken decisively will shift the bias in favour of bearish traders. The USD/CAD pair might then turn vulnerable to accelerate the fall towards the 1.3320 area before eventually dropping to the 1.3300 mark en route to the next relevant support near the 1.3240 region.

USD/CAD daily chart

Technical levels to watch