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Price Breaks 1.26 as USD Weakens, Oil Recovers


  • USD/CAD falls below the 1.2600 area as the US dollar continues to lose ground.
  • The US yields and Powell are contributing to the dollar weakness.
  • The oil price recovery is also weighing on the pair.

The USD/CAD price analysis suggests some weakness as the US dollar sell-off continues on Monday, thanks to Powell’s speech at Jackson Hole.

The USD/CAD pair hit new daily lows during the North American session, as bears continue to fall below 1.2600.

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Despite its modest intraday recovery, the pair struggled to hold onto its gains and instead fell for a second consecutive day at 1.2635. The US dollar has remained relatively strong against diminishing hopes of an earlier Fed rate hike than expected.

Federal Reserve Chairman Jerome Powell warned of downside risks due to the proliferation of Delta in his highly anticipated speech to a symposium in Jackson Hole. Furthermore, Powell downplayed market speculation by emphasizing that the Fed was not on the verge of a rate hike.

The benchmark yield on 10-year US Treasury bonds pushed closer to 1.30% following a reassessment of the likely timing of monetary tightening. This, coupled with the bullish sentiment underlying, kept the safe-haven dollar under pressure.

A catastrophic Category 4 hurricane is threatening the Gulf of Mexico, raising concerns about short-term disruptions. As a result, the Canadian dollar, which is pegged to commodities, was supported, putting some pressure on USD/CAD.

Last time on the downside, it approached 1.2585-80 horizontal support. Therefore, if the USD/CAD pair breaks to the downside convincingly, it will expose the pair to further weakness and potentially challenge the key psychological level of 1.2500.

The market now awaits US economic data with the pending home sales data. US bond yields, along with the broader risk sentiment, may impact the US dollar. In addition, investors will continue to monitor oil price dynamics for short-term opportunities.

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USD/CAD price technical analysis: 1.2600 broke, what next?

USD/CAD 4-hour price chart analysis
USD/CAD 4-hour price chart analysis

The USD/CAD managed to break the 1.2600 mark and is wobbling around the key horizontal level of 1.2585. The price is likely to test the 1.2550 zone ahead of 1.2500. The 200-period SMA on the 4-hour chart lies at 1.2570 area. It saved the pair from further fall in recent hour. However, volume is not in favor of bears at the moment.

On the upside, 1.2635 is the initial resistance ahead of 1.2700 psychological resistance.

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