USD/CAD Forecast: Bulls now await move beyond 100 DMA before placing fresh bets

USD/CAD consolidates in a range just below the weekly high touched earlier this Friday.
Bearish Oil prices lend support, though subdued USD price action acts as a headwind.
The fundamental backdrop still favours bulls and supports prospects for further gains.
The USD/CAD pair struggles to capitalize on the previous day’s strong move up and oscillates in a narrow trading band just below the 1.3500 psychological mark, or the weekly high touched during the Asian session this Friday. A modest US Dollar (USD) downtick is seen as a key factor acting as a headwind for the major, though any meaningful pullback still seems elusive.

The uncertainty over the Federal Reserve’s (Fed) ned policy move might hold back traders from placing aggressive bearish bets around the USD and lend some support. The US CPI report released on Wednesday pointed to further signs of inflationary pressures and should allow the US central bank to pause its year-long rate-hiking cycle. Investors, however, remain divided over the possibility of a rate cut later this year. This, along with looming recession risks, might continue to benefit the Greenback’s relative safe-haven status.

The mixed Chinese inflation figures and weaker US labor market data released on Thursday raised concerns about a global economic slowdown, casting doubts over fuel demand this year. This, in turn, drags Crude Oil prices lower for the third successive day, which is likely to undermine the commodity-linked Loonie and further contribute to limiting the downside for the USD/CAD pair. The aforementioned fundamental backdrop favours bullish traders and suggests that the path of least resistance for spot prices is to the upside.

Market participants now look forward to the release of the Preliminary Michigan Consumer Sentiment Index from the US later during the early North American session. This, along with the broader risk sentiment, will dive demand for the USD and provide some impetus to the USD/CAD pair. Traders will further take cues from Oil price dynamics to grab short-term opportunities on the last day of the week. Nevertheless, spot prices remain on track to register strong weekly gains and reverse a part of last week’s losses.

Technical Outlook
From a technical perspective, any subsequent move up is likely to confront stiff resistance near the 100-day Simple Moving Average (SMA), currently pegged just above the 1.3500 mark. Some follow-through buying will set the stage for an extension of this week’s bounce from the vicinity of the 1.3300 mark. The USD/CAD pair might then aim to surpass an intermediate barrier near the 1.3545-1.3550 area and reclaim the 1.3600 round figure. The momentum could get extended further towards the 1.3635-1.3640 supply zone en route to the April swing high, around the 1.3665-1.3670 area, and the 1.3700 mark.

On the flip side, weakness below the 1.3475 area, or the Asian session low, now seems to attract fresh buyers and remain limited near the 1.3410-1.3400 region. The latter should act as a pivotal point, which if broken decisively will make the USD/CAD pair vulnerable to weaken further below the 1.3365 intermediate support and challenge the 1.3315-1.3300 strong horizontal support. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move.