USD/CAD has pushed back above its 200-day and 200-hour moving averages near 1.3844-1.3848 after the latest U.S.-Canada trade talks broke down over the weekend. A sharp drop in crude oil is adding pressure on the Canadian dollar, and the technical picture now favors buyers as long as the pair holds above that zone.
USD/CAD has extended its rebound from last week's low at 1.37317, moving back above both its 100-hour and 200-hour moving averages. That shift has moved the short-term technical bias in favor of buyers.
Trade talks breakdown fuels the move
The fundamental catalyst behind the rally is the breakdown in the latest U.S.-Canada trade negotiations over the weekend. U.S. Trade Representative Jamieson Greer said the U.S. offered Canada significant concessions, but Canada continued to seek more, contributing to the impasse.
Greer downplayed the broader economic impact, saying the latest tariff measures affect only a very small portion of overall U.S.-Canada trade. He argued political considerations shaped Canada's negotiating stance and repeated that the U.S. trade deficit with Canada remains a concern for the administration. Still, the two sides are continuing to talk, with Canada Trade Official LeBlanc saying Greer has acted in good faith.
Given Canada's dependence on trade with the United States, the market appears to be treating the deterioration in relations as more of a risk for Canada, which has weighed on the Canadian dollar. The move is also being helped by a sharp decline in crude oil, down more than 3%, which pressures the currency of a major energy exporter like Canada.
Technical levels test buyers' control
USD/CAD fell sharply last week, extending below its 200-day moving average and a lower channel trendline. The pair also broke below the 61.8% retracement of the move up from the May low, opening the door to a swing area between roughly 1.3765 and 1.3778. Sellers pushed the pair to a low of 1.37317 before the rebound began.
The recovery first cleared the 100-hour moving average near 1.3806. It then surged above the 200-day MA at 1.3844 and the 200-hour MA near 1.3848. That zone is now the key short-term barometer: staying above it keeps buyers in control, though they still have work to do to wrestle full control from sellers.
Next targets if buyers hold the line
The next topside target sits in a swing area between 1.3868 and 1.3877, with the 38.2% retracement of the decline from the July high nearby at 1.3882. A break above that cluster would open the door toward the 100-day moving average at 1.3913, with the 50% retracement at 1.3929 as the next target above that.
Conversely, a move back below the 200-day and 200-hour moving averages would take some momentum out of the rally. Traders would then look back toward the 100-hour moving average near 1.3806, close to the broken downward trendline. A break below that level would hand sellers back control and turn attention toward last week's lows.
Source: Investinglive
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