USD/CAD: Key Level to Watch with the Bullish Pennant Formation

Summary:

USD/CAD has fomed a bullish pennant pattern ahead of the Fed minutes. Declining crude oil prices have also boosted the currency pair.

USD/CAD is on a bullish pennant formation as investors eye the Fed minutes scheduled for later in Wednesday’s session. On Tuesday, the pair surged as a reaction to the plunging crude oil prices.

As a commodity currency, the Canadian dollar thrives in rising oil prices. The ongoing OPEC+ crisis boosted WTI futures to a six-year high. However, the overcrowded bullish bets and optimism that the coalition will reach an agreement has triggered the plunge.

In today’s session, the focus will be on the FOMC meeting minutes. Investors will be keen on whether the hawkish tone in June’s Fed interest rate decision is still observable in the minutes. A hawkish tone will likely be a bullish catalyst for USD/CAD.

USDCAD technical analysis

USD/CAD has formed a bullish pennant ahead of the Fed minutes. On Tuesday, the decline in crude oil prices boosted the currency pair from an intraday low of 1.2302 to an over two-month high of 1.2498. It has since pulled back to the current 1.2462. On a two-hour chart, it is above the 25 and 50-day exponential moving averages.

In the near term, I expect USD/CAD to continue finding support at 1.2450. Depending on the details in the FOMC meeting minutes, the pair is likely to record further gains by hitting the next resistance level at 1.2500. Past that level, the next target will probably be at 1.2545. On the flip side, a move below 1.2450 will place the support level at 1.2415 or lower at 1.2400.