USD/CAD Daily Forecast – U.S. Dollar Fails To Continue The Rebound

USD/CAD Video 10.06.20.

U.S. Dollar Is Once Again Under Pressure

USD/CAD returned below 1.3400 as the U.S. dollar remained under pressure against a broad basket of currencies ahead of the Fed Interest Rate decision.

The U.S. Dollar Index is trying to settle below 96 as traders speculate that the Fed will provide dovish commentary and put additional pressure on the American currency.

Today, the U.S. has released inflation numbers which showed that prices remain under pressure. Inflation Rate was -0.1% month-over-month in May compared to -0.8% in April.

Since prices are under pressure, the Fed does not have to worry about inflation and can continue to provide the unprecedented monetary stimulus.

A dovish commentary from the Fed will serve as a bearish catalyst for USD/CAD. However, there is a risk that the Fed will use the recent better-than-expected employment reports as an excuse to limit its stimulus in order to avoid the unlimited expansion of its balance sheet which could put pressure on post-pandemic growth.

Technical Analysis

Yesterday, USD/CAD tried to rebound after the material downside move that has started at the beginning of June. However, this rebound attempt was stopped near 1.3500.

Currently, this level is the first material resistance level for USD/CAD. As it turned out, no material levels were formed between 1.3400 and 1.3500, and USD/CAD was able to move from 1.3400 to 1.3500 and back in a short period of time.

In order to develop material upside momentum, USD/CAD will have to settle above 1.3500. In this case, USD/CAD will head towards the next resistance level at 1.3570.

On the support side, the nearest support for USD/CAD is located at the recent lows at 1.3360. This level has already been tested several times and another test may be coming soon in case the U.S. dollar remains under pressure against a broad basket of currencies.

In case USD/CAD manages to settle below 1.3360, it will likely gain additional downside momentum and head towards the next support level at 1.3210.

From a big picture point of view, USD/CAD remains in a downside trend. Most likely, USD/CAD will need significant catalysts to change the trend and get above 1.3500.

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