USD/CAD Daily Forecast – Oil Price Upside Provides Support For The Canadian Dollar

USD/CAD Video 07.05.20.

Canadian Dollar Gains Ground On A Good Day For Riskier Assets

USD/CAD is correcting following the previous upside move as oil is gaining ground again, providing a boost to the Canadian dollar.

The U.S. Dollar Index has firmly settled above the psychologically important 100 level following the release of a disappointing Initial Jobless Claims report which showed that 3.2 million Americans filed for unemployment benefits.

The Continuing Jobless Claims report was worse than expected and showed that 22.6 million Americans were without jobs. The report’s data lags the Initial Jobless Claims data by one week.

This news provided support for the U.S. dollar as it continues to play a role of a safe haven asset of last resort but did not stop traders from buying riskier assets like equities or commodity-related currencies like the Canadian dollar.

In Canada, Friday will be a very data-heavy day as data for Unemployment Rate and Housing Starts  is set to be released.

Unemployment Rate is expected to jump to 18% compared to the previous reading of 7.8%. Housing Starts are expected to come at 110,000 compared to 195,000 in the previous month.

Lately, the oil price dynamics have played a decisive role for USD/CAD trading, and this pattern is likely set to continue for the upcoming days.

Technical Analysis

USD/CAD failed to settle above the resistance level at 1.4150 and fell below the 20 EMA at 1.4060. The pair’s failure to get above 1.4150 confirmed the pattern of lower highs, and USD/CAD stays in the downside channel.

The nearest support for the pair is located at the 50 EMA at 1.3970. In case USD/CAD manages to get below the 50 EMA, it will likely head towards the major support level at 1.3850.

This level has already been tested two times, and each attempt to breach this level was met with increased buying activity. However, the current pattern of lower highs increases risk that the third attempt to get below 1.3850 may be successful.

On the upside, the nearest material resistance for USD/CAD is at 1.4150, followed by a major resistance at 1.4250. At this point, it is clear that USD/CAD will need very material upside catalysts to get above 1.4250.