The USD/CAD pair falls back after a short-lived pullback move to near 1.3837 in Thursday’s American session. The Loonie asset retreats as the US Dollar (USD) surrenders majority of its intraday gains and the Canadian Dollar (CAD) strengthens.

The US Dollar retreats amid a sharp decline in preliminary Q2 Unit Labor Costs and the ISM Manufacturing PMI of July. Unit Labor Costs, a key measure of employee cost beared by the employer, declined to 0.9% from the estimates of 1.8% and the prior release of 3.8%, downwardly revised from 4.0%.

Meanwhile, the ISM Manufacturing PMI contracted at a faster pace to 46.8 from the estimates of 48.8 and the prior release of 48.5.

The Canadian Dollar advances amid a sharp recovery in the Oil price due to deepening risks of escalation in Middle East tensions. West Texas Intermediate (WTI), futures on NYMEX, gained an almost 4.5% in a single trading session on Wednesday. However, the Oil price edges lower in Thursday’s session but holds gains tightly. It is worth noting that Canada is the largest exporter of Oil to the United States (US) and higher Oil prices strengthen the Canadian Dollar.

USD/CAD declines to near Wednesday’s low of 1.3787. A breakdown below the same will trigger an Evening Star candlestick pattern. The reliability of the aforementioned candlestick appears strong as it has formed near the horizontal resistance plotted from April 16 high of 1.3846.

It would be early to consider a bearish reversal as the asset holds the 20-day Exponential Moving Average (EMA), which trades around 1.3760. Also, the 14-day Relative Strength Index (RSI) oscillates inside the bullish range of 60.00-80.00, suggesting that the bullish momentum is still intact.

A fresh buying opportunity would emerge if the asset breaks above July 29 high of 1.3865. This would drive the asset towards 1 November 2023 high at 1.3900, followed by 13 October 2022 high at 1.3978.

On the contrary, a decisive breakdown below July 2 high at 1.3755 will expose the asset to the round-level support of 1.3700 and July 17 low at 1.3657.

USD/CAD daily chart

(Click on image to enlarge)

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