• USD/CAD slides back closer to a one-week low amid a fresh wave of USD selling.
• Retreating crude oil prices undermine the loonie and seem to help limit the downside.
• Sustained weakness below the 1.2900 confluence will set the stage for further losses.

The USD/CAD pair witnessed an intraday turnaround from the 1.2955-1.2960 area and turns lower for the second straight day on Friday. The downward trajectory drags spot prices back closer to the one-week low touched the previous day, with bearish now awaiting sustained weakness below the 1.2900 mark.

The US dollar dives to a fresh weekly low in reaction to the softer US PCE report, which seems to have dashed expectations for more aggressive rate hikes by the Fed. This, in turn, is seen exerting some downward pressure on the USD/CAD pair. That said, a fresh leg down in crude oil prices could undermine the commodity-linked loonie and help limit the downside ahead of Fed Chair Jerome Powell's highly-anticipated speech at the Jackson Hole Symposium.

From a technical perspective, the 1.2900-1.2895 region marks confluence support comprising the 50% Fibonacci retracement level of the 1.2728-1.3063 rally and the 100-period SMA on the 4-hour chart. A convincing break below will be seen as a fresh trigger for bearish traders and make the USD/CAD pair vulnerable. The next relevant support is pegged near the 61.8% Fibo. level, around the 1.2855 region, which if broken will set the stage for further losses.

On the flip side, the 38.2% Fibo. level, around the 1.2935 area now seems to act as an immediate hurdle ahead of the daily swing high, around the 1.2955-1.2960 region. Some follow-through buying should allow bulls to aim back to reclaim the 1.3000 psychological mark. The latter coincides with the 23.6% Fibo. level, above which the momentum could further get extended towards the weekly swing high, around the 1.3060 region, en route to the 1.3100 round-figure mark.

USD/CAD 4-hour chart

Key levels to watch