USD/CAD refreshes multi-week tops, eyeing a move beyond 1.2400 mark

• A combination of factors assisted USD/CAD to gain traction for the fourth straight session.
• The Fed’s sudden hawkish shift pushed the USD Index to the highest level in two months.
• Retreating oil prices undermined the loonie and further contributed to the positive move.

The USD/CAD pair jumped to fresh seven-week tops during the early North American session, with bulls now looking to build on the momentum beyond the 1.2400 mark.

The pair built on this week's post-FOMC strong positive move and edged higher for the fourth consecutive session on Friday. This also marked the fifth day of a positive move in the previous six and was sponsored by a combination of factors.

The US dollar stood tall near two-month tops and remained well supported by the Fed's sudden hawkish sift. The Fed brought forward its projections for the first post-pandemic interest rate hikes to 2023 at the end of June policy meeting on Wednesday.

Bulls further took cues from a sharp decline in the equity markets, which tends to benefit the greenback's relative safe-haven status. The combination of factors, to a larger extent, helped offset the ongoing downfall in the US Treasury bond yields.

Meanwhile, concerns that an earlier than expected Fed rate hike will impact the growth outlook and hurt fuel demand weighed on crude oil prices. This, in turn, undermined the commodity-linked loonie and provided an additional boost to the USD/CAD pair.

With the latest leg up, the pair has now recovered nearly 400 pips from the vicinity of the key 1.2000 psychological mark, or multi-year lows touched earlier this month. Slightly overbought RSI on short-term charts might keep a lid on any further gains.

That said, the fundamental backdrop remains tilted in favour of bearish traders and supports prospects for an extension of the ongoing positive momentum. Hence, a subsequent move towards the next relevant hurdle, around the 1.2470 level, remains a distinct possibility.

Technical levels to watch