USD/CAD Price Analysis: Remains depressed below 1.2700 mark ahead of Powell

• A combination of factors prompted some selling around USD/CAD on Friday.
• The set-up supports prospects for the emergence of dip-buying at lower levels.
• The focus remains on Fed Chair Powell’s speech at the Jackson Hole Symposium.

The USD/CAD pair struggled to capitalize on its modest uptick, or find acceptance above the 1.2700 mark and witnessed a modest pullback on the last day of the week. The pair remained on the defensive through the first half of the European session and was last seen trading near daily lows, around the 1.2665 region.

A fresh leg up in crude oil prices underpinned the loonie and acted as a headwind for the USD/CAD pair. On the other hand, the underlying bullish sentiment weighed on the safe-haven US dollar amid a softer tone surrounding the US Treasury bond yields. That said, the downside remains cushioned ahead of Fed Chair Jerome Powell's highly-anticipated speech at the Jackson Hole Symposium.

From a technical perspective, the USD/CAD pair, so far, has managed to hold its neck above mid-1.2600s. Some follow-through selling might prompt technical selling and accelerate the intraday decline further towards the 1.2600 confluence support. The mentioned handle comprises of 200-period SMA on the 4-hour chart and a short-term ascending trend-line extending late July swing lows.

Meanwhile, technical indicators on daily/hourly charts are holding comfortably in the positive territory and support prospects for the emergence of some buying at lower levels. That said, bulls are likely to wait for a sustained strength beyond the 1.2700 mark before placing fresh bets. The USD/CAD pair might then accelerate the momentum further towards the 1.2740-45 intermediate resistance zone.

On the flip side, a convincing break below the 1.2600 mark could get extended towards the 1.2545 region, which coincides with the very important 200-day SMA. Some follow-through selling might turn the USD/CAD pair vulnerable and pave the way for an extension of the recent sharp retracement slide from mid-1.2900s, or the highest level since December 2020 touched last Friday.

USD/CAD 4-hour chart

Technical levels to watch