Ella 
USD/CAD has regained upward momentum and appears poised to extend its recent gains.
The relative strength indicator on the daily chart is approaching oversold territory and needs to be treated with caution.
Consolidation dips in USD/CAD towards the 1.3600 mark could attract fresh buyers, but the extent remains limited.
USD/CAD attracted some bargain hunting in Asia on Thursday, interrupting a slight retracement overnight from the 1.3675 area, or the highest level since March 28. USD/CAD is currently trading just below the mid-1.3600 level, up less than 0.10% on the day, but appears poised to extend the uptrend established over the past month-plus.
Increasing bets that the Federal Reserve (Fed) will raise interest rates once more in 2023 have bolstered underlying bullish sentiment on the U.S. dollar and validated the bullish outlook for USD/CAD. By contrast, the Bank of Canada is expected to cut interest rates relatively quickly amid signs that the Canadian economy is cooling rapidly, although it said on Wednesday it may raise borrowing costs again to combat inflation. This, combined with a pullback in crude oil prices, could weigh on the commodity-linked Canadian dollar and suggest that USD/CAD has the least resistance to the upside.
From a technical point of view, USD/CAD’s sustained break above the 1.3600 mark this week is seen as a new trigger for bulls. That said, USD/CAD has failed to break above the 1.3645-1.3650 level on several occasions, requiring investors to remain cautious before taking positions on further USD/CAD gains. Additionally, the daily chart RSI is close to overbought territory, suggesting that USD/CAD may be consolidating in a range. However, USD/CAD’s consolidative decline could find support around the 1.3600 resistance breakout point and attract fresh buying.
However, some follow-through selling could see a test of the next relevant support around 1.3525. Then there is the psychological 1.3500 mark, below which USD/CAD could accelerate its decline to test the all-important 200-day simple moving average (SMA), currently around 1.3460. The latter should be a key level, if USD/CAD breaks clearly below this level, it will invalidate the bullish outlook and tilt the near-term bias towards bearish traders.
Alternatively, the 1.3670-1.3675 area, the overnight swing high, could act as an adjacent resistance level, a clear breach of which could see USD/CAD revisit the 1.3700 mark. This momentum could extend further into the 1.3730 resistance area, and on to the 1.3800 round figure, before hitting the yearly high around 1.3860 hit in March.
