• USD/CAD languished near a two-week low amid the prevalent USD selling bias.
• Softer crude oil prices could undermine the loonie and help limit the downside.
• Investors await the Canadian CPI report before placing fresh directional bets.

The USD/CAD pair edged lower for the fourth successive day on Wednesday and was last seen trading near a two-week low, just above mid-1.2800s during the first half of the European session.

The US dollar remained on the defensive amid receding bets for a massive 100 bps rate hike by the Federal Reserve on July 27. This, in turn, was seen as a key factor that continued acting as a headwind for the USD/CAD pair. That said, a modest downtick in crude oil prices undermined the commodity-linked loonie and could help limit losses for the USD/CAD pair. Investors might also refrain from placing aggressive bets ahead of the Canadian CPI report.

From a technical perspective, the 1.2850 area represents confluence support - comprising of 50-day SMA and the 50% Fibonacci retracement level of the 1.2517-1.3223 strong rally. This should now act as a key pivotal point for intraday traders and help determine the next leg of a directional move for the USD/CAD pair. Some follow-through selling should pave the way for a fall towards the 1.2830-1.2820 support en-route the 1.2800 round-figure mark.

A convincing break below the latter would be seen as a fresh trigger for bearish traders and make the USD/CAD pair vulnerable to accelerating the fall towards the 1.2700 mark. The downward trajectory could further get extended towards the next relevant support near the 1.2675-1.2665 horizontal zone.

On the flip side, any meaningful recovery attempt might now confront stiff resistance near the 1.2900 mark ahead of the 1.2925-1.2930 region. This is followed by the 38.2% Fibo. level, around the 1.2960 area, which if cleared decisively would suggest that the correction has run its course and pave the way for additional gains.

The USD/CAD pair might then aim to surpass the 1.3000 psychological mark and retest the 1.3075-1.3085 supply zone, coinciding with the 23.6% Fibo. level. The positive momentum could eventually lift spot prices back above the 1.3100 round-figure mark.

USD/CAD daily chart

Key levels to watch