The USD/CAD currency pair has been on an upward trending movement over the last couple of months following a major pullback between mid-March and mid-April. The greenback has gained ground since then, rallying the pair to a new 12-month high of 1.3382.

This rally has partly been fueled by weakening oil prices coupled by tepid economic data from the Bank of Canada and other economic bodies in the country. In addition, the U.S. inflation rate has continued to rise while a second funds rate hike for the year 2018 also added some optimism in the U.S. economy thus strengthening the Dollar.

Not even the growing trade frictions between the U.S. and China seem to hold the green back although a continuation of the current tightening in bond yields could cede the advantage to the ‘Loonie’ momentarily, thereby resulting in short-term pullback for the USD/CAD currency pair.

So, how could traders target profit opportunities in the CAD/USD pair? Well, looking at the daily chart below, it appears that there could be a short-term pullback this week as some traders move in to close profitable trades at around the 1.3300-1.3320 level.

At the current exchange rate of 1.3308, the bulls will be looking to take profits at about 1.3350-1.3380 levels, which pretty much represent the most recent peak zone. These levels are achievable this week should the current short-term rebound hold through Friday.

However, should the rebound run out of momentum, a short-term pullback on the current main trend in the daily chart can be expected. This could provide bearish profit opportunities at 1.3250, 1.3200 or even down below at support 1, at around the 1.3100 level.

 A further movement downwards can also be realized should a rebound in oil prices ensue. With stronger oil prices, the Bank of Canada could see it fit to soften stance on a potential interest rate hike. This coupled with growing trade tensions between the U.S. and China and a corrective decline in bond yields, the greenback could be under pressure thereby ceding ground to the loonie. This is what creates potential bearish targets at Support level 2 and level 3 (1.3000 and 1.2800) in the intermediate term.

And while expanding the timeframe to the weekly chart confirms a long-term bullish momentum, the broader view also paints a clear picture on the potential targets for the bears for the next few weeks and months.

Based on the weekly chart above, the mini upward trending channel appears to be well inside the main channel. And just like in the daily chart, the USD/CAD currency pair appears to have recently touched the top side of the channel, which naturally implies a potential pullback.

If the pullback occurs as predicted, then bearish traders could target intermediate profits at support level 1 (1.3100) or support level 2 if the pullback is completed and touches the baseline below at about 1.2870-1.2900 trading zone. An unlikely bearish breakout from the main channel could also make support level 3 (1.2580) a potential profit target for the bears.

On the other hand, the bulls will be looking for a potential bullish breakout from the main channel, in which case, resistance level 1 (1.3500) long-term could be tested. A longer-term target at resistance level 2 equal to the current 13-month high of 1.3793.

From a fundamental perspective, a bullish breakout will depend on how the market reacts to the recent rate hike. This will be clear once the U.S. non-farm payrolls, inflation, and GDP numbers are out early next month.

Currently, the reception looks positive from a trading perspective but with a few murmurs claiming that the U.S. economy could suffer from global slowdown, it remains to be seen how things will pan out in the next few months.

Again, China could also be a key player. It is not clear how long the trade wars will last, or how deep they could go. Both the U.S. and China have been threatening to impose more tariffs on each other’s products in a bid to boosting local manufacturers, but analysts think that this could be more politically inclined that it is about supporting local companies.

Battles of this nature can quickly escalate to hurt economies, and this could affect the greenback thereby providing the loonie with an opportunity to bounce back and force a major decline in the USD/CAD exchange rate.