USD/CAD Daily Forecast – Oil Rally Supports Canadian DollarUSD/CAD managed to settle below 1.3500 and gained additional downside momentum.
USD/CAD Video 05.06.20.
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WTI oil has settled close to $40 per barrel while Brent oil is above this level, providing support to commodity-related currencies.
The support provided by oil price upside outweighs some strength of the U.S. dollar following the release of better-than expected U.S. employment reports.
In a surprising development, U.S. Unemployment Rate declined from 14.7% in April to 13.3% in May. The Non Farm Payrolls report showed that 2.5 million jobs were created in May compared to analyst consensus which called for a loss of 8 million jobs.
This data has provided some support to the U.S. dollar, and the U.S. Dollar Index managed to settle above 96.5.
Canada’s employment data was also better than expected. Unemployment Rate increased from 13% in April to 13.7% in May compared to analyst expectations of 15%.
The world markets believe that a robust recovery is guaranteed, and riskier assets like the Canadian dollar benefit from such environment. The optimism is so huge that S&P 500 has already reached levels seen at the beginning of this year when the world economy was not crushed by the coronavirus crisis.
It remains to be seen whether such optimism will be long-lived as current asset prices imply a very fast and strong recovery.
USD/CAD managed to settle below 1.3500 and developed additional downside momentum. Currently, it is trying to get below 1.3400. In case this attempt is successful, USD/CAD will head towards the next support level at 1.3335.
If USD/CAD gets below 1.3335, it will continue its downside move towards the next support at 1.3210. I’d note that RSI is getting into the oversold territory so the risks of a rebound are increasing.
On the upside, the nearest resistance is located near 1.3500. This is the area where USD/CAD tried to find support during the current upside move but this support was not sufficient enough to stop USD/CAD from additional downside.
In case USD/CAD settles above 1.3500, it will likely gain upside momentum and head towards the next resistance level at 1.3570. This level has already been tested during an attempt to rebound from 1.3500, and USD/CAD may have better chances to get above this level on the second attempt.
For a look at all of today’s economic events, check out our economic calendar.