The Canadian Dollar (CAD) extends its recovery for the third straight session, supported by a softer US Dollar and easing geopolitical tensions in the Middle East.

Key Factors:

• Geopolitical Relief: De-escalating tensions following Iran downplaying reports of an Israeli drone attack reduce risk aversion, benefiting the CAD.
• Softer USD: The US Dollar retreats as investors reassess the pace of Fed tightening amid mixed signals regarding inflation progress.
• Technical Rebound: The CAD benefits from the USD/CAD reversal following the formation of a potential bearish Head & Shoulders pattern.

Technical Analysis:

• Head & Shoulders Pattern: The recent decline suggests a potential reversal pattern, raising the possibility of further CAD gains.
• Key Support: The neckline of the H&S pattern at 1.3725 offers immediate support. A break below could lead to a test of 1.3665 and potentially the 1.3620 target, coinciding with the 50% Fibonacci retracement.
• Resistance: A move above 1.3800 would invalidate the bearish pattern, shifting the focus back to the 1.3850 high.