USD/CAD attempting to bounce up from levels below 1.3200

• The US Dollar is trying to bounce up from four-month lows at 1.3185.
• Oil prices’ recovery and a dovish Fed are weighing on the US Dollar.
• USD/CAD is in a corrective reaction from oversold levels.
   

The US Dollar is showing a mild recovery attempt after having reached its lowest level since August, at 1.3185. The pair, however, remains under strong bearish pressure on the back of increasing hopes of Fed cuts in 2024 and higher oil prices.

The attacks in the Red Sea have forced shipping forms to find alternative routes to oil cargo. Apart from increasing costs, this has boosted fears about supply disruptions, ultimately pushing prices higher and boosting the CAD, as Canada is one of the world’s major oil exporters.

Beyond that, the downward revision of the US Q3 GDP combined with the larger-than-expected decline in the PCE Prices Index has cemented hopes that the US central bank will start cutting rates in early 2024.

In this scenario, with the Dollar Index depressed at multi-year lows, the current USD recovery is likely to be a correction from oversold levels. Resistances at 1.3220 and 1.3275 are likely to challenge bulls. On the downside, supports are 1.3150 and 1.3090.

Technical levels to watch