USD/CAD Daily Forecast – Test Of Support At 1.2500

U.S. Dollar Moves Lower Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2500 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index declined below the 93 level and made an attempt to get to the test of the support at 92.80. In case the U.S. Dollar Index gets to the test of this level, USD/CAD will find itself under more pressure.

Today, U.S. reported that Inflation Rate increased by 5.4% year-over-year in July compared to analyst consensus of 5.3%. Core Inflation Rate grew by 4.3% year-over-year, in line with the analyst consensus.

The reports indicated that prices did not get out of control, and some traders and analysts will certainly speculate that we have seen peak inflation in the U.S.

Not surprisingly, the U.S. dollar found itself under pressure on the foreign exchange market after the release of inflation reports. However, I’d note that Treasury yields remained mostly flat which indicates that bond traders are still worried about high inflation and the potential reduction of Fed’s asset purchase program. If Treasury yields continue to move higher in the upcoming trading sessions, U.S. dollar will get more support.

Technical Analysis

USD to CAD settled below the 20 EMA at 1.2530 and is trying to settle below the next support level at 1.2500. In case USD to CAD settles below this level, it will get to the test of the next support at 1.2480.

A successful test of the support at 1.2480 will push USD to CAD towards the 50 EMA at 1.2465. In case USD to CAD manages to settle below the 50 EMA, it will head towards the support at 1.2450.

On the upside, the previous support at the 20 EMA at 1.2530 will serve as the first resistance level for USD to CAD. A move above this level will lead to a test of the resistance at 1.2550.

In case USD to CAD gets above 1.2550, it will head towards the significant resistance level at 1.2590. A successful test of this level will open the way to the test of the next resistance at 1.2625.

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