USD/CAD Daily Forecast – Another Test Of Support At 1.2700

U.S. Dollar Is Under Pressure Against Canadian Dollar

USD/CAD is currently trying to settle below the support level at 1.2700 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index declined below the support level at the 20 EMA at 90.30 and is trying to move closer to the 90 level. If the U.S. Dollar Index manages to settle below 90, it will head towards the next support level at 89.75 which will be bearish for USD/CAD.

Foreign exchange market traders are positioning themselves ahead of the U.S. Fed Interest Rate Decision which will be announced on Wednesday. Traders expect that the Fed will deliver a dovish commentary but it is not clear whether it will be sufficient enough to push dollar closer to yearly lows.

Today, riskier assets are supported by the International Monetary Fund’s decision to raise its economic growth forecast for 2021. Unprecedented support from the world central banks and governments boosted recovery, and IMF believes that the world economy entered the year 2021 with a decent upside momentum.

Economic growth forecasts may soon get another boost if the U.S. delivers another round of economic stimulus which may provide additional support to riskier assets like Canadian dollar.

Technical Analysis

USD to CAD made an attempt to settle above the resistance at 1.2775 but failed to develop additional upside momentum and pulled back towards the support level at 1.2700. Currently, it is trying to settle below this support level.

In case this attempt is successful, USD to CAD will gain downside momentum and move towards the next support level at 1.2665. No material levels were formed between 1.2665 and 1.2700 so this move may be fast. If USD to CAD declines below 1.2665, it will head towards the next support level at 1.2625.

On the upside, the nearest resistance level for USD to CAD is located at the 20 EMA at 1.2725. If USD to CAD gets above this level, it will head towards the next resistance at 1.2750. A successful test of the resistance at 1.2750 will push USD to CAD towards the next resistance level at 1.2775.

For a look at all of today’s economic events, check out our economic calendar.