USD/CAD Daily Forecast – All Eyes On Oil Market Reaction To The Production Cut Deal

USD/CAD Video 10.04.20.

Canadian Dollar Continues To Gain Ground Against The U.S. Dollar

USD/CAD has a calm trading session due to Good Friday. However, the next week is set to be very interesting since oil, which is one of the key catalysts for the Canadian dollar, will certainly be on the move.

OPEC+ countries have agreed to cut oil production by 10 million barrels per day (bpd). Also, OPEC+ expects that other oil producers will join the effort and cut their production by 5 million bpd. The news on this front might come over the weekend.

The Canadian dollar has recently gained ground against the U.S. dollar amid general U.S. dollar weakness which was caused by unprecedented monetary stimulus and general market optimism which provided support for riskier assets.

The U.S. dollar continues to serve as safe haven asset of last resort so good news are often bearish for the dollar while bad news are bullish.

Today, the U.S. reported Core Inflation Rate and Inflation Rate for March. Core Inflation Rate was 2.1%, down from 2.4% in February. Inflation Rate was 1.5%, down from 2.3% in February.

Both numbers were below analyst consensus which called for Core Inflation Rate of 2.3% and Inflation Rate of 1.6%. The decline in inflation suggests that the blow from coronavirus containment measures has already been material.

Technical Analysis

USD/CAD stays below the 20 EMA level at 1.4060 and tries to settle closer to the first major support level at 1.3925. The pair has already tried to test this level, but these attempts were unsuccessful.

However, the pair is coming closer to the level day by day, and a test of 1.3925 looks imminent. If USD/CAD manages to settle below 1.3925, it will likely develop downside momentum and quickly get to the 50 EMA level at 1.3850.

On the upside, the 20 EMA at 1.4060 is the first resistance for USD/CAD. Just like the support level at 1.3925, this level has also been tested several times, so the pair is currently trading in a rather tight range.

If this resistance level is breached to the upside, USD/CAD will get into the 1.4060 – 1.4260 range. The area near 1.4250 will likely serve as a major resistance level for the pair.