USD/CAD Daily Forecast – Canadian Dollar Is Supported By Surging Oil PricesUSD/CAD consolidates near 1.4150 as safe haven purchases of U.S. dollar are offset by the strength in the oil market.
The Canadian Dollar Holds Well Thanks To Oil Price Upside, But The Weekend Factor May Be In Play Once Again
USD/CAD continues to consolidate near the 1.4150 level. U.S. dollar has shown strength against a broad basket of currencies today as the situation on the coronavirus front continued to worsen and investors favored safe haven assets.
The U.S. Dollar Index has recently breached the 100 level and is currently heading towards 101. However, the Canadian dollar is supported by a rally in the oil market, which is boosted by hopes for an oil production cut deal.
An increase in the price of oil will be a positive development for the Canadian economy. The Canadian oil trades at significant discount to WTI oil and has reached single-digit levels during the current crisis, so oil price upside is necessary to improve the situation.
Currently, the problems with coronavirus in the U.S. have not hurt the U.S. dollar, which still serves as the safe haven asset of last resort. On the contrary, the bad news on the economic front have typically led to upside moves in the American currency.
In all likelihood, this pattern will not change in the coming days. I’d also note that safe haven buying may intensify on Friday since market participants may want to reduce exposure to riskier assets.
USD/CAD continues to consolidate near the 1.4150 level. The 20 EMA, which is currently located at 1.4080, serves as a major support level for the pair. This level has already been tested several times, and each time USD/CAD saw increased buying activity in this area.
In case the 20 EMA is breached to the downside, the pair could quickly move towards the next support level at 1.3925. Fundamentally, a combination of oil price strength and broader U.S. dollar weakness could serve as a catalyst for this move, so traders should watch oil and the U.S. Dollar Index closely.
On the upside, the resistance in the 1.4270 area remains intact. The pair will have to breach this resistance level to have a chance to get to the major resistance level at 1.4330.
I’d note that volatility is starting to decrease in the forex markets so traders should expect that major moves could take more time to develop.