During Tuesday's Asian session, the USD/CAD pair encounters some selling pressure, erasing a significant portion of the overnight gains to a multi-day high. In the last hour, spot prices have fallen to a new daily low, below the mid-1.3400s, and the intraday decline can be attributed solely to repositioning trade ahead of the publication of the latest Canadian consumer inflation figures later in the early North American session.

In addition, traders will consider US macro data, such as the monthly Retail Sales figures and the Empire State Manufacturing Index. In the interim, a slightly softer tone encircling the U.S. Dollar (USD) is viewed as another factor exerting some downward pressure on the USD/CAD pair. In light of the growing consensus that the Federal Reserve (Fed) will maintain its hawkish posture and maintain higher interest rates for an extended period of time, any meaningful USD corrective pullback from Monday's two-month high seems unlikely.

Moreover, concerns regarding China's deteriorating economic conditions should act as a tailwind for the safe-haven dollar and help limit deeper losses for the USD/CAD pair, at least for the time being. Meanwhile, subdued Crude Oil prices have no effect on the commodity-linked Canadian dollar or the major. However, the technical configuration continues to favour bullish traders and indicates that the path of least resistance for spot prices is to the upside. Consequently, any succeeding decline could be viewed as a buying opportunity.

Last week's sustained break through the 1.3370-1.3380 confluence – which consists of the 50% Fibonacci retracement level of the May-July decline and the 100-day Simple Moving Average (SMA) – was viewed as a new catalyst for bullish traders. In addition, the USD/CAD pair's near-term bullish prognosis is supported by the overnight close above the extremely significant 200-day simple moving average (SMA) and the positive oscillators on the daily chart. Prior to positioning for further gains, caution is warranted by the recent failure near the psychological level of $1,3500.00.

A sustained strength beyond the aforementioned handle should permit the USD/CAD pair to accelerate its momentum towards the next significant barrier in the region of 1.3555-1.3560. The upward trend could continue and eventually elevate spot prices to the round figure of $1,360.00.

On the other hand, any further intraday decline is likely to find support near the confluence resistance breakpoint of 1.3400-1.3390 ahead of the 1.3355 region. This is followed by the 38.2% Fibonacci level, located in the region between 1.3315 and 1.3310, and the 1.3300 level. A convincing break below the latter could provoke some technical selling and expose the USD/CAD pair to further weakness below the 1.3250 intermediate support and a test of the 23.6% Fibonacci level in the 1.3225 area.

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