USD/CAD Daily Forecast – Canadian Dollar Gains Ground On Global Market Optimism
Flat oil and major rally in equity markets helps the Canadian dollar gain ground against the U.S. dollar.
USD/CAD Video 07.04.20.
USD/CAD Moves Lower Amid Broad U.S. Dollar Weakness
USD/CAD breached the 20 EMA level and continues the downside move amid general U.S. dollar weakness against a broad basket of currencies.
The U.S. Dollar Index fell below the 100 level as global markets showed optimism about progress on the virus containment front.
The coronavirus situation remains tense, with as much as 369,069 cases recorded in the U.S., according to the data from Johns Hopkins University. However, it looks like the situation is stabilizing in Spain and Italy, while the hardest-hit U.S. states also show signs of progress.
In current conditions, this is enough for the global markets to have material upside, leading to weakness of the U.S. dollar which serves as a safe haven asset of last resort.
There were no notable economic releases today which also provided support for the Canadian dollar as bad news are typically bullish for the U.S. dollar in the current environment.
Oil is mostly flat as the market waits for the upcoming negotiations about a major oil production cut, which are set to take place on April 9, 2020.
This date will be very important for USD/CAD since oil price dynamics is a major catalyst for the Canadian dollar, and oil will likely make a big move depending on whether oil production cut negotiations are successful or not.
Technical Analysis
USD/CAD breached the low end of the local upside channel to the downside and continues to move lower. In addition, USD/CAD settled below the support level at 20 EMA near 1.4100.
The pair almost reached the next support level near the recent lows at 1.3925. Currently, the combination of downside technical catalysts looks strong enough, an a test of this level may be coming soon.
If the support level at 1.3925 is breached to the downside, USD/CAD will have a chance to get to the next support level at the 50 EMA at 1.3830. The pair will likely need additional broader weakness in the U.S. dollar to make this move.
On the upside, the previous support at 20 EMA became the new resistance level. If this level is breached to the upside, USD/CAD will get back to the previous trading range between 1.4100 and 1.4250.
