The USD/CAD currency pair continues to face selling pressure for the third consecutive day, trading below the key 1.3500 level and marking a weekly low during the early European session on Friday.
The ongoing decline in the US Dollar (USD) is driven by expectations of a significant interest rate cut by the Federal Reserve (Fed) in September. Additionally, rising Crude Oil prices are bolstering the commodity-linked Canadian Dollar (Loonie), further pressuring the USD/CAD pair. Despite this bearish sentiment, the downside may be limited as traders await the crucial monthly employment reports from both the US and Canada, set for release later in the North American session.
Technically, the pair has broken below the significant 200-day Simple Moving Average (SMA), a development that has intensified bearish sentiment. Oscillators on the daily chart have rebounded from oversold conditions but remain entrenched in negative territory. This technical setup suggests that the path of least resistance is to the downside, supporting the possibility of further declines from the 1.3565 area, which represents a nearly two-week high reached on Wednesday.
For additional downside momentum, traders will need to see continued selling pressure below the 1.3485 level, or the weekly low. A break below this point could accelerate declines towards the multi-month low of approximately 1.3440, last seen the previous week, and potentially extend towards the March swing low around 1.3420. Further weakness could drive the pair towards the 1.3400 mark and the next key support area near 1.3365-1.3360.
Conversely, any recovery attempts could face resistance around the overnight swing high of 1.3525, potentially capping gains ahead of the 1.3565 area. A sustained move above this resistance could push the USD/CAD pair back towards the 200-day SMA, now acting as resistance near the 1.3590 zone. A decisive break above this level might reverse the current bearish trend and trigger a short-covering rally towards the 1.3640-1.3645 resistance zone.
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