CANADIAN DOLLAR OUTLOOK:
- USD/CAD extends losses amid positive market sentiment
- Higher oil prices also benefit the Canadian dollar
- The pair seems to be on the verge of invalidating a key technical support zone, a bearish signal for price action
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The Canadian dollar, colloquially known as the loonie by forex traders, continued to appreciate on Thursday, supported by widespread U.S. dollar weakness, risk-on sentiment on Wall Street and rising oil prices, with USD/CAD retreating more than 0.2% to 1.3530, the lowest exchange rate in a week.
After falling more than 2.4% from the 2023 highs reached on March 10, the pair is currently sitting above an important technical support zone located near the psychological 1.3500 level and the 50-day simple moving average, as seen on the daily chart below. Traders should keep a close eye on the pair’s behavior in this area for clues on the near-term direction.
For bearish conviction to strengthen, USD/CAD must break below 1.3500 decisively on daily closing prices. With global market sentiment on the mend, this scenario could unfold in short order, paving the way for a drop towards trendline support at 1.3420. On further weakness, the focus shifts to the 200-day simple moving average, followed by 1.3220.
Conversely, if bulls manage to wrestle temporary control and drive prices higher, initial resistance can be seen at 1.3700, a barrier that has halted upside momentum in its tracks on numerous occasions in December 2022 and January this year. In the event of a bullish breakout, a retest of the March swing high cannot be ruled out.
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USD/CAD TECHNICAL CHART
