• USD/CAD has attempted a recovery after dropping to near 1.3410, however, the downside bias is still solid.
• The USD Index would extend its downside journey on expectations of an early pause in the rate-hiking spell by the Fed.
• Solid oil prices are expected to keep the Canadian Dollar on the front foot.

The USD/CAD pair has attempted a recovery after dropping to near 1.3410 in the early Asian session. The recovery move by the Loonie asset is expected to turn into a short-lived pullback as the US Dollar Index (DXY) would extend its downside journey on expectations of an early pause in the rate-hiking spell by the Federal Reserve (Fed).

The Loonie asset has registered a six-day losing spell and more downside is in pipeline amid expectations for a further jump in oil prices. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices will strengthen the Canadian Dollar.

Going forward, the street is expected to keep its focus on the United States Automatic Data Processing (ADP) Employment Change (March) data, which is scheduled for Wednesday. The economic data is seen lower at 205K vs. the prior release of 242K.

On a four-hour scale, the Loonie asset has shifted below the 61.8% Fibonacci retracement (plotted from February 02 low at 1.3262 to March 10 high at 1.3862) at 1.3493. The major will likely retrace its entire move.

Downward-sloping 10-and 20-period Exponential Moving Averages (EMAs) at 1.3474 and 1.3511 respectively indicate that the bearish momentum is extremely strong.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00, showing active downside momentum, however, an oversold situation cannot be ruled out.

A mean-reversion to near the 10-EMA would offer a bargain sell for investors and the major would continue its downside move toward February 16 low at 1.3357 and February 02 low at 1.3262.

In an alternate scenario, an upside move above the psychological resistance of 1.3500 will shift traction in the favor of US Dollar bulls, which will drive assets towards 50% and 38.2% Fibo retracements at 1.3563 and 1.3633 respectively.

USD/CAD four-hour chart