USD/CAD Daily Forecast – Test Of Support At 1.2170

Canadian Dollar Gains Ground Against U.S. Dollar

USD/CAD is currently trying to get back below the support at 1.2170 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index has made several attempts to settle above the resistance at the 50 EMA at 90.60 in recent trading sessions, but these attempts yielded no results. In case the U.S. Dollar Index gets above this level, it will head towards the resistance at 90.90 which will be bullish for USD/CAD.

Today, U.S. reported that Building Permits declined by 3% month-over-month in May while Housing Starts grew by 3.6%. The foreign exchange market has mostly ignored these economic reports as traders remained focused on the upcoming Fed Interest Rate Decision.

The Fed will soon reveal its current view of the economic situation and share its views about inflation. Recent inflation reports from various countries, including U.S., indicated that prices are rising faster than expected.

Canada has just reported that Inflation Rate increased by 3.6% year-over-year in May compared to analyst consensus which called for growth of 3.5%. Core Inflation Rate increased by 2.8% year-over-year compared to analyst consensus of 2.4%.

If the Fed highlights inflation risks, USD/CAD will get more support. If the Fed stays dovish, the U.S. dollar may find itself under more pressure.

Technical Analysis

USD to CAD failed to settle above the resistance at the 50 EMA near 1.2200 and pulled back towards the support at 1.2170.

In case USD to CAD manages to settle below this support level, it will head towards the next support which is located at the 20 EMA at 1.2130. A successful test of the support at the 20 EMA will open the way to the test of the support at 1.2100.

On the upside, USD to CAD needs to settle above the 50 EMA to continue its upside move. The next resistance level is located at 1.2250. If USD to CAD gets above this level, it will head towards the resistance at 1.2270. A move above this level will push USD to CAD towards the resistance at 1.2300.

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