USD/CAD Daily Forecast – Oil Price Rebound Boosts The Canadian Dollar

USD/CAD Video 22.04.20.

USD/CAD Fails To Settle Above The Resistance Level At 1.4250

USD/CAD pulled back after unsuccessful test of the resistance level at 1.4250 as global market optimism and rising oil provided support for the Canadian dollar.

Oil has finally found some support following several days of unprecedented downside. The situation for the Canadian oil, especially Western Canadian Select, remains very challenging but any upside moves are welcome in the current environment.

Earlier, the U.S. dollar was correcting against a broad basket of currencies, and the U.S. Dollar Index made an attempt to get below the 100 level, but failed to do so and rebounded closer to 100.50.

In my opinion, the U.S. dollar dynamics against a broad basket of currencies show that market participants want to maintain their exposure to safe haven assets even during periods of global market upside because the economic situation is set to be very challenging for the upcoming months.

Canada has recently released Inflation Rate data. In March, inflation increased 0.9% year-over-year compared to analyst consensus that called for an increase of 1.2%. The month-over-month data showed that inflation declined by 0.6% compared to consensus of -0.4%.

Prices are falling faster than expected due to the negative impact of coronavirus containment measures on demand. It remains to be seen whether deflation will turn into a longer-term problem. At this point, it looks like many developed countries will face very low or negative inflation in the following months due to the virus.

Technical Analysis

The resistance level at 1.4250 has proved its strength. It has been tested many times during both the previous upside move and the current upside move, and each time USD/CAD met heavy selling pressure.

It looks like USD/CAD will need additional catalysts to get above 1.4250. In this case, I’d expect rapid upside momentum which will take the pair to the next resistance level at 1.4330.

On the support side, the 20 EMA at 1.4065 serves as the first material support level for USD/CAD. In case this support level is breached to the downside, USD/CAD will head towards the 50 EMA level at 1.3920. It is also possible that USD/CAD will get some support near 1.4000, at the low of the recent pullback.