USD/CAD Daily Forecast – Another Test Of Support At 1.3135

USD/CAD Video 27.08.20.

Canadian Dollar Tries To Gain More Ground Despite Weaker Oil

USD/CAD is currently trying to settle below the support at 1.3135 despite weak oil and U.S. dollar rebound after Powell’s comments.

The speech of Fed Chair Jerome Powell was the main event of the day for currency markets. As expected, Powell laid out a plan to introduce an average inflation target of 2%, a measure that would allow the Fed to keep rates low in case inflation gets above the 2% level.

Initially, the U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, found itself under significant pressure and tested the support at 92.50.

However, it managed to rebound above the 93 level and even tried to get to the test of the 20 EMA level at 93.35.

It looks like the market does not take the inflation threat seriously. However, the adoption of the average inflation target of 2% instead of a firm inflation target of 2% is still a long-term negative catalyst for the U.S. dollar.

Today, the U.S has provided Initial Jobless Claims and Continuing Jobless Claims reports which were mostly in line with analyst estimates.

The situation in the job market remains challenging as 1 million Americans filed for unemployment benefits in one week. According to Powell’s recent comments, the full recovery of the job market could take years.

Technical Analysis

USD to CAD made an attempt to settle below the support level at 1.3135 but did not manage to gain sufficient downside momentum.

In case USD to CAD is able to settle below the support at 1.3135, it will head towards the next material support level at 1.3080. At this point, the downside trend in USD to CAD remains intact, so USD to CAD maintains solid chances to get to lower levels.

On the upside, the nearest resistance is located at the 20 EMA at 1.3235. There are no material levels between 1.3135 and 1.3235 so USD to CAD may quickly get to the test of the 20 EMA in case bullish catalysts emerge.

A successful test of the 20 EMA level will open the way to the next resistance level at 1.3330.

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