USD/CAD Daily Forecast – First Test Of Support At 1.3050

USD/CAD Video 28.08.20.

Canadian Dollar Continues To Gain Ground Against The U.S. Dollar

USD/CAD managed to settle below the support at 1.3135 and developed strong downside momentum which pushed it to 1.3050. However, USD to CAD has later received more support and rebounded closer to 1.3100.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has settled below 92.50 as the American currency found itself under pressure after Fed’s decision to adopt an average inflation target of 2%.

With an average inflation target of 2% instead of a firm target of 2%, the Fed may keep rates at current low levels for years, which is a long-term negative catalyst for the U.S. dollar.

Today, Canada released GDP Growth Rate data for the second quarter. On a quarter-over-quarter basis, GDP Growth Rate was -11.5%. On an annualized basis, GDP Growth Rate was -38.7%.

In the U.S., Personal Income has increased by 0.4% in July while Personal Spending grew by 1.9%. Both reports were better than analyst expectations.

WTI oil did not manage to gain more upside momentum as Hurricane Laura did not cause much damage to platforms or refineries. Oil’s failure to get above the nearest resistance at $43.50 may have put some pressure on the Canadian dollar.

Technical Analysis

USD to CAD gained significant downside momentum once it was able to get below 1.3135. However, USD to CAD found support at 1.3050 and rebounded closer to 1.3100.

On the way down, USD to CAD also faced some support at 1.3080, a level that I have previously indicated as the first target after 1.3135, and USD to CAD will likely have some support at this level again in case it continues its downside move.

If USD to CAD manages to get below 1.3080, it will head towards recent lows at 1.3050.

On the upside, the previous support level at 1.3135 will likely serve as the first resistance level for USD to CAD. A move above this level will open the way to the test of the next resistance level at the 20 EMA at 1.3220. There are no material levels between 1.3135 and the 20 EMA so USD to CAD may quickly get to the test of the 20 EMA level.

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