USD/CAD Daily Forecast – Support At 1.2625 In Sight

USD/CAD Video 14.01.21.

Canadian Dollar Gains Ground Against U.S. Dollar

USD/CAD managed to get below the support at 1.2665 and is moving towards the next support level at 1.2625 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to settle above the resistance at 90.50 but failed to develop sufficient upside momentum and declined closer to the nearest support level at the 20 EMA at 90.20. If the U.S. Dollar Index settles below the 20 EMA, it will move towards the 90 level which will be bearish for USD/CAD.

Today, the U.S. reported that Initial Jobless Claims increased to 965,000 while Continuing Jobless Claims grew to 5.27 million. The reports highlighted the need for another round of stimulus. Recent reports suggested that Joe Biden will soon present a stimulus plan worth $1.5 billion – $2 billion.

It remains to be seen whether the new stimulus plan will put additional pressure on the U.S. dollar as money-printing may push U.S. government bond yields higher, providing some support to the American currency on the foreign exchange market.

Technical Analysis

USD to CAD gained strong downside momentum and is trying to get to the test of the support level which is located near January lows at 1.2625. RSI is still in the moderate territory so there is plenty of room to gain additional momentum in case the right catalysts emerge.

In case USD to CAD manages to settle below the support at 1.2625, it will move towards the next support level at 1.2590. A successful test of the support at 1.2590 will open the way to the test of the support at 1.2550. I’d note that USD to CAD has not visited this territory for several years so it remains to be seen whether previous levels will be relevant for today’s trading.

On the upside, the previous support at 1.2665 will likely serve as the first resistance level for USD to CAD. If USD to CAD gets back above this level, it will head towards the next resistance at 1.2700.

A move above 1.2700 will push USD to CAD towards the resistance at 1.2720. In case USD to CAD settles above 1.2720, it will head towards the 20 EMA at 1.2740.

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