Strong Oil Fails To Provide Material Support To Canadian Dollar
USD/CAD continues to trade in a range between the support at 1.3135 and the resistance at 1.3200 as the U.S. dollar is mostly flat against a broad basket of currencies.
The U.S. Dollar Index is currently trying to settle below the nearest support level at 92.80. In case this attempt is successful, the American currency will find itself under pressure which will be bearish for USD/CAD.
Interestingly, USD/CAD showed little reaction to the recent oil price upside . However, the continuation of the current upside move in the oil market may ultimately provide more support to the Canadian dollar and serve as a bearish catalyst for USD/CAD.
Today, Canada reported Retail Sales data for July. On a month-over-month basis, Retail Sales grew by 0.6% compared to analyst consensus which called for growth of 1%. Excluding Autos, Retail Sales decreased by 0.4% compared to analyst consensus which predicted growth of 0.5%.
The Retail Sales data shows that the rebound of the Canadian economy is slowing down. However, this slowdown will likely happen in all developed economies after the initial strong rebound.
During the current trading session, USD to CAD tested both the support level at 1.3135 and the resistance level at 1.3200. As a result, USD to CAD failed to gain any momentum and is trading not far from the 20 EMA at 1.3165.
In recent trading sessions, USD to CAD easily moved through the 20 EMA level so this level has lost its relevance. The main support level for USD to CAD is located at 1.3135.
This support level has already been tested many times, and a move below 1.3135 will attract speculative traders, leading to increased downside momentum. In this case, USD to CAD will head towards the next support level at 1.3050.
On the upside, the resistance at 1.3200 remains the main obstacle on the way up. USD to CAD needs to settle above this level to have a chance to test the next resistance at the 50 EMA at 1.3245.
Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.