USD/CAD Targets Support at 50% Fibonacci Retracement Level of 1.3890

• USD/CAD pulls back toward 1.3890 following an unsuccessful attempt to continue its nine-day rally.
• Criminal indictment threats against Fed Chair Powell have put pressure on the US Dollar.
• An increasing unemployment rate in Canada is expected to weigh on the Canadian Dollar.

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The USD/CAD pair declined on Monday, ending its nine-day winning streak, and corrected to around 1.3890 as the US Dollar retraced following criminal charges against Federal Reserve Chair Jerome Powell.

At the time of reporting, the US Dollar Index (DXY), which measures the Greenback against six major currencies, was down 0.22% to approximately 98.90, retreating from a fresh monthly high of about 99.26 reached last Friday.

On Friday, the U.S. Department of Justice issued a subpoena to the Federal Reserve concerning Chair Jerome Powell’s Senate testimony last June, which involved a multiyear renovation project of historic buildings with an estimated cost of $2.5 billion.

Powell responded by stating that the charges are not related to his testimony or the renovation project, but rather serve as a pretext.

Meanwhile, the Canadian Dollar (CAD) remains under pressure as the unemployment rate rose to 6.8%, exceeding estimates of 6.6% and the previous 6.5% reading. The higher jobless rate may increase expectations that the Bank of Canada (BoC) will soon resume monetary easing.

USD/CAD technical analysis

USD/CAD is trading lower around 1.3890 on Monday. The 20-day Exponential Moving Average (EMA) has started to rise, currently at 1.3806, with the price holding above this level, supporting a short-term recovery outlook.

The 14-day Relative Strength Index (RSI) stands at 61, indicating solid positive momentum after bouncing back from oversold levels.

Measured from the recent high of 1.4140 to the low at 1.3643, the 50% Fibonacci retracement at 1.3891 serves as immediate resistance. Above this, the 61.8% retracement near 1.3950 may cap further upward movement. If the pair fails to break through these resistance levels, the recovery could remain limited, with pullbacks likely to find initial support at the rising 20-day EMA around 1.3806.

Sources: Fxstreet