USD/CAD Daily Forecast – Canadian Dollar Gains Ground Despite Low Oil Prices

USD/CAD Video 28.04.20.

U.S. Dollar Is Under Pressure As Lockdown Measures Are Gradually Lifted In Many Countries

The U.S. dollar was showing weakness today amid continued optimism in the global markets, and the U.S. Dollar Index moved below the psychologically important 100 level.

This optimism led to weakness in USD/CAD which has tested the resistance level at the 50 EMA at 1.3950. However, wild swings in the oil price put pressure on the Canadian dollar and did not allow USD/CAD to settle below the 50 EMA.

The U.S. Federal Reserve has started its two-day meeting and will announce its rate decision on Wednesday. The Fed has fired so many bullets since the beginning of the coronavirus crisis that the market does not expect announcement of any additional moves.

There’s also no sense to cut the rate further since the U.S. is clearly not prepared to enter into the negative rate territory which could endanger the stability of the U.S. dollar and the demand for U.S. Treasuries, which continue to serve as safe haven assets of last resort during the current turmoil.

Oil price dynamics continue to present a major risk for the Canadian dollar since the oil storage situation is very tense and a repeat of the catastrophe on the oil price front, when the front-month WTI oil contract went deep into the negative territory, could not be ruled out yet.

The Canadian oil trades at a discount to WTI, and the Canadian Crude Index has currently settled below $10 while the Western Canadian Select is trying to stay above zero with periodic visits into the negative territory.

Technical Analysis

USD/CAD is currently trading in a range between the 50 EMA at 1.3950 and the 20 EMA at 1.4065. In case the pair manages to settle below the first support level at the 50 EMA, it will head towards the recent lows at 1.3850.

On the upside, the 20 EMA at 1.4065 serves as the first resistance level for USD/CAD. If it is breached to the upside, the pair will move towards a minor resistance level at 1.4125.

The ultimate goal of an upside move, in case it happens, is the major resistance level at 1.4250 which has already been tested many times. In my opinion, USD/CAD will need very strong catalysts to move past this level.