USD/CAD Stalls Below 1.3850, Supported by Oil Price Rebound and Fed Expectations

George Solotarov
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USD/CAD Stalls Below 1.3850, Supported by Oil Price Rebound and Fed Expectations

The US Dollar's rally against the Canadian Dollar has hit a roadblock below the 1.3850 resistance level, with the pair currently trimming gains during the European session. Despite this, downside attempts appear limited due to a recent rebound in crude oil prices triggered by escalating tensions in the Middle East.

Israel's strikes in Lebanon, in response to a deadly attack by Hezbollah, have raised concerns about potential disruptions to oil supply, lending support to the Canadian Dollar.

However, the US Dollar is facing pressure from market expectations of a dovish shift in the Federal Reserve's rhetoric at its upcoming meeting. Recent PCE inflation data, showing a steady decline in price pressures, has bolstered hopes of Fed easing, potentially limiting the USD's upside.

USD/CAD Technical Analysis:

The technical outlook for USD/CAD remains bullish, with downside attempts finding support in the 1.3800-1.3820 area. A break below this support level could expose the pair to further downside towards 1.3750. Meanwhile, immediate resistance is seen at 1.3850, followed by the November 2023 high at 1.3900.

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