USD/CAD Daily Forecast – The Downside Trend Continues

USD/CAD Video 08.06.20.

Canadian Dollar Gains Ground Despite Weaker Oil

USD/CAD continues its downside move despite weaker oil as the U.S. Dollar Index remains under pressure due to optimism in the global markets.

Canada’s Housing Starts report showed that Housing Starts were 193,500 in May compared to analyst consensus of 155,000. It should be noted that the total number of Housing Starts includes Quebec which was left out of the April survey. Exluding Quebec, Housing Starts declined to 132,500.

The U.S. Fed is set to make its Interest Rate Decision on Wednesday, and some analysts believe that it can signal that monetary easing programs may have some limits.

The recent data suggests that the economy is starting to rebound, and the Fed may start thinking about the future stated of its balance sheet.

While all major central banks in the world have promised to deliver as much liquidity as necessary to deal with the consequences of lockdowns, the major growth in debt levels presents a problem which should be addressed.

Meanwhile, the World Bank has published its new forecast which states that the global GDP will decline by 5.2% in 2020. At this point, such dire predictions have no impact on the market which continues to favor riskier assets.

However, traders should keep a close eye on the economic data as market mood may change quickly in case economic reports do not live up to high expectations.

Technical Analysis

USD/CAD managed to get below 1.3400 and continues its downside move. The nearest support for USD/CAD is located at 1.3335. In case USD/CAD moves below this support level, it will gain downside momentum and head towards the next support level at 1.3210.

I’d note that RSI is in the oversold territory which increases chances for rebound. However, the downside momentum is strong so USD/CAD may continue to fall without a pullback.

On the upside, the nearest resistance level is located at 1.3440. If USD/CAD settles above this level, it will head towards the next resistance near 1.3500. A move above 1.3500 could take USD/CAD closer to the following resistance at 1.3570.

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