USD/CAD Daily Forecast – Strong Oil Limits U.S. Dollar Upside

USD/CAD Video 03.08.20.

Resistance At The 20 EMA Stays Strong

USD/CAD tried to gain more upside momentum but faced resistance at the 20 EMA at 1.3450 as the U.S. dollar rebounded against a broad basket of currencies while WTI oil returned back above the key $40 level.

The U.S. Dollar Index continued its rebound and managed to settle above 93.5. However, it faced resistance at the 94 level and pulled back. In case the U.S. Dollar Index manages to get above 94, USD/CAD will have a good chance to develop more upside momentum.

While the rebound of the U.S. Dollar Index was bullish for USD/CAD, the oil price upside limited the American currency’s gains against the Canadian dollar.

For WTI oil, the key level is the resistance at $42.50. A move above this level will likely lead to increased upside momentum and provide significant support to commodity-related currencies including the Canadian dollar.

Today, the U.S. has reported Manufacturing PMI data for July. Manufacturing PMI increased from 49.8 in June to 50.9 in July while analysts expected that it would grow to 51.3. Numbers above 50 show expansion.

Canada is set to provide its Manufacturing PMI report tomorrow.

Technical Analysis

USD to CAD did not manage to get above the nearest resistance at the 20 EMA at 1.3450 and declined closer to 1.3400. The nearest material support level for USD to CAD is located at 1.3330. This level has already been tested several times and proved its strength.

The resistance at the 20 EMA has the potential to become a significant obstacle on the way up. At this point, USD to CAD may find itself stuck in a trading range between the support at 1.3330 and the resistance at the 20 EMA.

In case USD to CAD manages to get above the 20 EMA, it will head towards the major resistance level at 1.3500. A move above this level will likely lead to increased upside momentum, and USD to CAD will head towards the next resistance level at the 50 EMA at 1.3550.

On the support side, a move below 1.3330 could trigger a sell-off, taking USD to CAD to the next support level at 1.3270.

For a look at all of today’s economic events, check out our economic calendar.