USD/CAD Daily Forecast – Canadian Dollar Shows Signs Of Strength After Several Weak Days

USD/CAD Video 04.05.20.

USD/CAD Fails To Continue The Upside Move After The Release Of U.S. Factory Orders Data

USD/CAD is mixed despite the U.S. dollar strength against a broad basket of currencies as oil continues its upside move and provides support for the Canadian dollar.

The U.S. Dollar Index has found material support near the 99 level and is rebounding towards the 100 level. I’d note that this rebound is mostly seen in trading action against leading currencies like euro or Swiss frank, while the American currency’s performance against commodity-related currencies like the Canadian dollar or the Australian dollar is muted.

The U.S. has recently reported Factory Orders data for March which showed that Factory Orders declined by 10.3% compared to analyst consensus which called for a decline or 9.7%.

This is the largest decrease in Factory Orders since the time they started to get tracked. Obviously, April data will also look grim. Today, the U.S. dollar is getting support from bad news due to its role as the safe haven asset of last resort, although it’s hard to say that all markets are in a sell-off mode.

USD/CAD is pulling back following several days of upside which is not surprising especially given the continued upside in the oil market. At this point, the problems with near-term contract expiry are behind us, and all contracts worth mentioning trade firmly in the positive zone.

Technical Analysis

USD/CAD stays above the 20 EMA at 1.4050 and the key question is whether it will continue the recent upside move. At this point, the nearest major resistance level is located at 1.4250. This level has already been tested many times and has proved its strength.

In case USD/CAD fails to get above the recent highs at 1.4150, a pattern of lower highs may present itself on the chart which will be bearish for USD/CAD.

On the support side, the 20 EMA will likely serve as the first material support level for the pair, followed by the 50 EMA at 1.3960. In case USD/CAD manages to settle below the 50 EMA, it will likely head towards the major support level at 1.3850.

From a big picture point of view, USD/CAD continues to trade in a wide range between 1.3850 and 1.4250, and the pair will need substantial catalysts to get out of this range.