USD/CAD Daily Forecast – Canadian Dollar Shows Strength Despite Oil Price Weakness

Markets Stay Optimistic For Now, Leading To Weakness In The U.S. Dollar

The Canadian dollar is showing strength despite continued weakness in oil, which is hurt by prospects of worsening oil demand.

The U.S. Dollar Index was in a correction mode today and almost touched 101 but has then rebounded and trades closer to 102. Trading in many asset classes has been choppy today, but currently the positive momentum from the previous trading session is maintained as markets hope that the U.S. coronavirus aid package together with Fed’s unlimited QE would provide material support for most assets.

These hopes increase investors’ risk appetite which is bearish for the U.S. dollar in the current market environment as the American currency is viewed as a safe haven asset of last resort.

It remains to be seen when the euphoria from the massive monetary stimulus ends and the markets will turn to the actual economic data. I believe that the upcoming Initial Jobless Claims data, which is set to be published on Thursday, will have a major impact on the currency markets.

The current consensus number is one million, a huge increase from the previous reading of 281,000. If the actual data shows that the situation is even worse, the U.S. dollar may receive material support due to its safe haven status.

Technical Analysis

USD/CAD is coming close to an important juncture. A decisive breakout of the 1.4330 support level will likely take the pair closer to the next support level at 1.4150.

USD/CAD has already made its attempt to get below 1.4330, but it was unsuccessful and the pair quickly returned above the major support level.

In case USD/CAD fails to breach the current support level to the downside, it will have material chances to test the 1.4530 resistance level once again. This time, the chances for a successful test of this resistance will be bigger, and USD/CAD may finally visit the 1.4610 – 1.4670 area.

It remains to be seen whether market participants will be ready for any strong move before they see the Initial Jobless Claims data, which will provide the first big opportunity to evaluate the impact of coronavirus containment measures on the U.S. economy.