US Dollar Jumps as Coronavirus Risks and Falling Oil Prices take Centre Stage

By:
Bilal Jafar
Updated: Feb 6, 2020, 12:19 UTC

US Dollar posted strong gains against major currencies this week as investors seem concerned about the coronavirus risks and falling crude oil prices.

U.S. Dollar

The Greenback was also boosted by stronger than expected US factory orders for December.

The Dollar Index (DXY) started February on a positive note as the index rose for the third consecutive session on Wednesday. The recent bullish sentiment in the US Dollar found extra support from the record-setting stock markets as the Nasdaq Composite Index set a record high in Tuesday’s trading session.

Despite all these encouraging factors, investors are still concerned about the magnitude of risks associated with the Coronavirus, China has assured that they are taking all the necessary measures to mitigate risks associated with the outbreak but global investors are still unsure about the economic consequences. Recent economic data from the US helped investors regain confidence in the Dollar and reduced expectations around the Fed cutting interest rates.

Coronavirus is not the only concern weighing on the mind of investors, falling Oil prices will also have a significant impact on economies around the world. Coronavirus is impacting demand for Oil which may weigh on oil producing countries like Canada.

The Canadian Dollar fell to a two-month low against the US Dollar as Loonie continues to slide along with the crude oil prices due to slowing demand from China. Canadian Dollar remained under pressure against the US Dollar as the USDCAD jumped above the key level of 1.33000, reaching a two-month high level. As of writing, the price is hovering around 1.32900.

On the technical side, USDCAD on the 4-Hour timeframe has respected an uptrend since January 22. The price jumped above the key level of 1.33000 and registered the highest level of the period under study at 1.33028 on February 3. Bulls managed to keep the price around 1.33000. As of writing, the USDCAD is hovering around 1.32900 with positive Moving Average Convergence Divergence and Momentum above the 100 level.

The pair is currently trading above the 50-period simple moving average with Relative Strength Index above 50 which supports the recent bullish price move. Resistance level lies at 1.33028 while the support level lies at 1.31159. Bulls are eyeing a close above the 1.33000 level, but a close below 1.31100 could strengthen the argument for further bearish movements.

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Written on February 6, 2020 by Bilal Jafar, FX Trainer at FXTM

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About the Author

Bilal Jafarcontributor

Bilal holds an MBA in Finance from Institute of Business and Management. He has over eight years of experience in financial markets.

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