USD/CAD hits fresh 3-week highs above 1.2700 and retreats

USD/CAD rose further during the American session and printed a fresh 3-week high at 1.2713. It pulled back below 1.2700 afterwards, and it was trading at 1.2690, headed toward the sixth daily gain in a row. 

The greenback is rising versus emerging market and commodity currencies on Monday, extending the rally that started last week from multi-month lows. Rising US bond yields are boosting the US dollar on Monday. The Loonie is being affected by the slide in crude oil prices. Canada is celebrating a holiday today, so markets are closed. 

USD/CAD: a bottom in place? 

On Friday, price climbed back above the 20-day moving average for the first time since mid-May and broke the 1.2630 area after the NFP report. Now the pair is testing the 1.2700  handle, a consolidation on top, would signal a continuation of the recovery. 

Also, it could signal that a temporary bottom was reached two weeks ago at 1.2410. From that level, it has risen almost 300 pips. The 4-hour chart shows price above key MAs with many of them pointing now to the upside. 

A decline back below 1.2630 could remove the current bullish momentum while under 1.2570 the Loonie could recover the initiative.  A potential signal of some short-term exhaustion or of a potential correction is the RSI indicator that is turning to the downside after hitting 70. 

Technical levels 

To the upside, resistance levels might be located at 1.2710/15 (daily high), 1.2745 (Jul 14 high) and 1.2770/75 (Jul 13 high). On the downside, support might be located at 1.2670 (American session low), 1.2625/30 (daily low) and 1.2590 (Aug 2 high).