The USD/CAD pair experiences renewed buying interest for the second consecutive day on Monday and hovers near the upper range of its daily trading zone, approximately around 1.3220-1.3225, during the early European session.
China’s GDP figures for the second quarter fall below market expectations, raising concerns about fuel demand in the world’s largest crude oil importer. This, coupled with increased production in Libya, leads to a decline in crude oil prices from their peak in April.
As a result, the commodity-linked Canadian dollar weakens, providing support for the USD/CAD pair. However, the upward movement is limited due to the subdued performance of the US dollar.
From a technical standpoint, the USD/CAD pair stages a strong recovery from levels below 1.3100, which was its lowest point since September 2022. The rally stalls near the 100-period Simple Moving Average on the 4-hour chart, followed closely by the 50% Fibonacci retracement level of the recent decline observed over the past week.
If this resistance level is convincingly surpassed, it could serve as a fresh catalyst for bullish traders, potentially leading to significant intraday gains.
Should the USD/CAD pair breach this level, it may climb further to test the 61.8% Fibonacci level around 1.3270, before aiming to reclaim the psychological 1.3300 mark. Sustained buying pressure would suggest that the pair has formed a short-term bottom, setting the stage for a potential challenge of the monthly swing high around the 1.3385 zone.
However, caution is warranted for bullish traders as technical indicators on the daily chart still remain in negative territory.
On the downside, immediate support lies around the 1.3200 level, corresponding to the 38.2% Fibonacci level. A breach of this support level could expose the 23.6% Fibonacci level around 1.3150.
If selling pressure continues, it would indicate that the corrective rebound has reached its peak, making the USD/CAD pair vulnerable to testing the year-to-date low in the 1.3095-1.3090 region.
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