Photo by Michelle Spollen on Unsplash

The Canadian Dollar (CAD) is trading higher against the US Dollar (USD) in the American session on Friday, with the Loonie erasing gains from earlier sessions.

At the time of writing, USD/CAD is trading back below 1.3600, with prices currently testing the lowest levels in eight months.

Friday’s headlines were dominated by reports that Israel had targeted Iranian nuclear facilities and apartment complexes, reportedly killing several senior Iranian officials. That news briefly lifted USD/CAD off its recent lows, though the pair soon slid back down, with the lower trendline of its wedge still holding firm.

Also on Friday, the University of Michigan released its preliminary Consumer Sentiment survey, showing a noticeable uptick in confidence among US households.

Meanwhile, both one-year and five-year Consumer Inflation Expectations edged lower, echoing softer-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) readings earlier in the week. 

Slowing inflation has increased the prospects for the Federal Reserve (Fed) to cut interest rates, reducing US yield and weighing on the USD.

Technical analysis: USD/CAD falls below 1.3600, threatening wedge support

USD/CAD is approaching the support level of 1.3588, which corresponds to the base of a falling wedge pattern on the four-hour chart. This level has now become near-term resistance, contributing to bearish momentum. 

The Relative Strength Index (RSI) is currently near 32, indicating a bearish bias and approaching oversold territory, though there is still potential for further declines.

If the bearish momentum persists, the price could reach the psychological support level of 1.3500, potentially leading to a further decline toward the October low of 1.3472. On the other hand, if the price moves above 1.3588 and surpasses the psychological resistance level of 1.3600, it could provide an opportunity for USD/CAD bulls to retest the 10-period Simple Moving Average (SMA) at 1.3624.

USD/CAD four-hour chart

has fallen below 1.3600, which is now providing

(Click on image to enlarge)

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