USD/CAD went down after two days of good gains, having reached the 200 EMA at 1.2817. The pair is currently bouncing and could reach the 21 SMA at 1.2915 at even the top of the downtrend channel at 1.2950.

On the other hand, the US dollar (USDX) is trading at 104.20. It recovered solidly from the low at 103.39, after two days of losses, amid the rally in Treasury yields.

This, in turn, helped the USD/CAD pair find support near 5/8 Murray and at the 200 EMA in the zone of 1.2821-1.2824 and stop its intraday bearish path.

Investors remain optimistic in the hope that inflation is nearing its peak, which was made evident by the surge in risk appetite prevailing in equity markets.

The loonie is expected to trade inside the downtrend channel and may bounce above the 200 EMA towards 1.30 and could even hit 7/8 Murray at 1.3061.

The market sentiment report shows that there are 60% of traders who are buying the Canadian dollar. According to this trend, we could expect a pullback towards the top of the downtrend channel and then the price could resume its secondary downtrend.

The main trend remains bullish as long as USD/CAD trades above 1.2800 and above the 200 EMA on the 4-hour chart.

On the other hand, a sharp break and a daily close below the 200 EMA located at 1.2824 could change the main trend and the pair could start a new bearish sequence that could push the price to the 1.2695 area and even to 3/8 Murray at 1.2573.