USD/CAD jumps to five-week tops, around 1.2525-30 region amid stronger USD
- USD/CAD gained strong follow-through traction for the second successive day.
- The USD built on the post-CPI gains and remained supportive of the momentum.
- The fundamental/technical set-up seems tilted firmly in favour of bullish traders.
The USD/CAD pair continued scaling higher through the early European session and shot to fresh five-week tops, around the 1.2525-30 region in the last hour.
The pair attracted some dip-buying near the 1.2460-55 region on Thursday and built on the previous day's US CPI-inspired rally of over 115 pips from sub-1.2400 levels. The US consumer prices in October rose at the fastest annual pace since 1990 and reinforced expectations about an early policy tightening by the Fed. This, in turn, continued acting as a tailwind for the US dollar, which climbed to fresh YTD tops and assisted the USD/CAD pair to gain traction for the second successive day.
On the other hand, a softer tone around crude oil prices undermined the commodity-linked loonie and provided an additional boost to the USD/CAD pair. Apart from this, the uptick could further be attributed to some technical buying on a sustained move beyond the very important 200-day SMA. That said, relatively thin liquidity conditions, on the back of a bank holiday in the US and Canada, might hold back bullish traders from placing aggressive bets and keep a lid on any further gains.
Nevertheless, the fundamental backdrop seems tilted firmly in favour of bullish traders and supports prospects for an extension of the ongoing positive move. Even from a technical perspective, the USD/CAD pair was last seen flirting with a resistance marked by the top boundary of a three-week-old ascending channel. A sustained strength beyond will reaffirm the positive outlook and pave the way for additional gains towards reclaiming the 126.00 round-figure mark.
Technical levels to watch