USD/CAD breaks out to new high as crude oil continues slide

USD/CAD climbed slightly above key resistance around the 1.3200 level on Monday, primarily due to the Canadian dollar having been dragged down by falling crude oil prices. As concerns over crude oil oversupply continue, both the West Texas Intermediate and Brent benchmarks slid to new lows on Monday, extending their retreat from June highs.

As a result, the oil-linked Canadian dollar continued to be pressured, boosting the USD/CAD currency pair up to the noted 1.3200 resistance area. The past week has seen substantial gains for USD/CAD as the US dollar has remained supported ahead of this week’s Fed meeting, while the Canadian dollar has fallen sharply in conjunction with crude oil.

The recent rise for USD/CAD prompted a breakout last week above the upper resistance border of a large triangle consolidation pattern that has been in place since the 1.2500-area lows in early May. Mid-July saw a bounce off the lower support border of this triangle, which resulted in the rally within the past week.

Having reached slightly above 1.3200 resistance as of Monday, the currency pair has hit a critical technical juncture. Continued upside momentum above 1.3200 this week could be prompted by a more hawkish-than-expected Fed statement on Wednesday, which would support the US dollar, or a continued slide for crude oil prices, which would further pressure the Canadian dollar. If either or both of these conditions occur, a sustained breakout above 1.3200 would confirm a follow-through of the triangle breakout, with the next major upside targets at the 1.3400 and then 1.3600 resistance levels.

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