USD/CAD Price Analysis: Jumps to multi-day tops amid a sharp fall in oil prices

• A sharp fall in oil prices undermined the loonie and pushed USD/CAD to multi-day tops.
• Some follow-through buying will set the stage for a move to reclaim the 1.2600 mark.
• A sustained break below the 1.2425-20 support will negate the near-term positive bias.

The USD/CAD pair gained some positive traction heading into the North American session and shot to multi-day tops, around the 1.2535-40 region in the last hour. The mentioned area marks an important horizontal support breakpoint and should act as a pivotal point for intraday traders.

A sharp fall in crude oil prices, now down over 2.25% for the day, undermined the commodity-linked loonie and turned out to be a key factor that provided a goodish lift to the USD/CAD pair. That said, the prevalent US dollar selling bias kept a lid on any further gains, at least for now.

Bulls, so far, have struggled to capitalize on the move beyond the 200-hour SMA, making it prudent to wait for some follow-through buying before positioning for any further gains. The next relevant hurdle is pegged near the 1.2570 region, or the 38.2% Fibonacci level of the 1.2808-1.2422 slide.

A sustained move beyond should allow bulls to aim back to reclaim the 1.2600 round-figure mark. This is followed by the 50% Fibo. level, around the 1.2615 region, which if cleared decisively will set the stage for an extension of the positive momentum towards the 1.2655-60 zone (61.8% Fibo.).

On the flip side, the key 1.2500 psychological mark – coinciding with the 23.6% Fibo. level – now seems to protect the immediate downside. Any subsequent decline might continue to attract some dip-buying and remain limited near the 1.2425-20 strong horizontal support.

A convincing break below will be seen as a fresh trigger for bearish traders and pave the way for the resumption of the recent sharp pullback from levels beyond the 1.2800 mark, or multi-month tops touched in July. The USD/CAD pair might then turn vulnerable to break below the 1.2400 level.

USD/CAD 1-hour chart

Technical levels to watch