• USD/CAD struggled to preserve its intraday gains and was weighed down by a combination of factors.
• Rebounding oil prices underpinned the loonie and acted as a headwind amid modest USD weakness.
• Bulls need to wait for a convincing breakthrough a descending trend-line extending from late March.

The USD/CAD pair built on the previous day's solid rebound from the 1.2400 neighbourhood, or the YTD low and gained some positive traction during the first half of the trading on Wednesday. The momentum lifted spot prices back above the 1.2500 psychological mark, though bulls struggled to capitalize on the move or find acceptance above the 200-hour SMA.

An uptick in crude oil prices underpinned the commodity-linked loonie. This, along with modest US dollar pullback from a nearly two-year high, kept a lid on any further gains for the USD/CAD pair. That said, the continuous surge in the US Treasury bond yields favours the USD bulls and should help limit any meaningful downside for the major, at least for the time being.

From a technical perspective, the intraday uptick faltered near a descending trend-line extending from the high touched on March 28, which should now act as a key pivotal point for traders. Meanwhile, technical indicators on the daily chart are still holding deep in the bearish territory and warrant caution before confirming that the USD/CAD pair has bottomed out.

The technical setup makes it prudent to wait for a convincing break through the aforementioned trend-line resistance to support prospects for any meaningful upside. The USD/CAD pair might then accelerate the recovery move towards an intermediate hurdle near the 1.2540 region. Some follow-through buying should allow bulls to make a fresh attempt to conquer the 1.2600 mark.

On the flip side, sustained weakness back below the 1.2470-1.2460 region will suggest that the overnight short-covering move has run its course and prompt fresh selling. This, in turn, would set the stage for a slide back towards challenging the 1.2400 round figure, or the lowest level since November 2021, which if broken would be seen as a fresh trigger for bearish traders.

USD/CAD 1-hour chart

Key levels to watch