FX.co ★ Blackpink | USD/CAD

USD/CAD has drawn in buyers for three consecutive days and is currently fluctuating in the 1.4070-1.4075 range in the Asian session on Wednesday, close to its highest level since July 29. In addition, the fundamentals also support the likelihood of continuation of the strong upward trend that has been seen in the last two weeks. The steep fall in the price of crude oil continues to negatively impact the Loonie, with a positive undertone from the US Dollar (USD), providing a push to the USD/CAD pair and underpinning the bullish view on the pair. In fact, West Texas Intermediate (WTI), the US benchmark crude oil, declined to its lowest level in over two weeks on Tuesday owing to growing optimism of a diplomatic solution to end the US-Iran war. Moreover, Iran reportedly promised to open the Strait of Hormuz in exchange for military de-escalation by the United States, reducing supply worries even more as Saudi Arabia seeks to reopen a vital trade route. On the other hand, falling oil prices reduce any concerns about rampant inflation and also help keep US Treasury bond yields low compared to multi-year highs. This may prevent the USD bulls from making new trades and thus limit the upside potential for the USD/CAD. That said, the DXY (index tracking the performance of the US dollar versus a basket of currencies) continues to hover close to multi-week high reached on Tuesday amid hawkish stance by the Federal Reserve (Fed). Indeed, the US central bank raised rates for the first time in three years and indicated an additional hike in the current year. Thus, the direction of least resistance for the Greenback and USD/CAD seems higher. Currently, the USD/CAD pair is above the critical Fibonacci retracement levels of 38.2% and 50.0%, while rising further after breaking out of the 61.8% retracement. The breakout creates a clear positive momentum to the spot price in the immediate future and strengthens the case for further upside move towards the next resistance at the 78.6% retracement level at 1.4137 before moving to the cycle high level at 1.4246. In the downside, the first resistance lies at 61.8% retracement level at 1.4051, then the 50.0% retracement level at 1.3991 and finally at the 38.2% retracement level at 1.3931.