USD/CAD Daily Forecast – U.S. Dollar Gains Ground Against The Canadian Dollar

USD/CAD Video 16.04.20.

U.S. Dollar Gets A Boost After U.S. Initial Jobless Claims Release

USD/CAD continues the upside move following the release of U.S. Initial Jobless Claims data which came mostly in line with analyst expectations but showed that the huge blow to employment continued.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, managed to breach the psychologically important 100 level and trends to the upside.

Interestingly, the U.S. dollar is showing strength at the same time when the U.S stock market is also in the green zone. During the current crisis, the U.S. dollar strength was often accompanied by equity market weakness as investors rushed to safe haven assets and dumped riskier assets.

Meanwhile, oil, which is an important catalyst for the Canadian dollar, fails to show material upside amid concerns about oil demand. WTI Oil stays dangerously close to the major support level in the $19 – $20 range, and its move below this range could trigger a sell-off in the Canadian dollar.

Canadian oil is priced at a substantial discount to WTI. While the Canadian Crude Index manages to stay above $10, Western Canadian Select is firmly below this mark. Additional downside in WTI would push Canadian oil to ridiculous levels and hurt the Canadian economy even more.

Today, Canada released Manufacturing Sales data for February which showed that Manufacturing Sales increased by 0.5% month-over-month. Unfortunately, this is the data for the period before COVID-19 really hit the country, so the March release will look much worse.

Technical Analysis

USD/CAD breached the 20 EMA level at 1.4040 and continues its upside move. The next resistance for the pair is located near 1.4250. USD/CAD has tried to get above this level several times, but the resistance proved to be very material.

In case USD/CAD can settle above 1.4250, the pair will head towards the next resistance level at 1.4330. Most likely, USD/CAD will need broader U.S. dollar strength to get a chance to test this level.

On the support side, the 20 EMA at 1.4040 serves as the first support level for the pair. In case this level is breached to the downside, USD/CAD will head towards the 50 EMA level at 1.3880.