USD/CAD Daily Forecast – U.S. Dollar Gains Ground Amid Global Market Sell-Off

USD/CAD Video 24.06.20.

Weak Oil And Grim Economic Forecast From IMF Put Pressure On The Canadian Dollar

USD/CAD is gaining ground as the U.S. dollar is supported by fears about the second wave of coronavirus and grim economic forecast from IMF while weaker oil puts additional pressure on the Canadian dollar.

IMF has recently released its World Economic Outlook Update. Not surprisingly, forecasts for the world economy were corrected to the downside. While the correction itself was expected, the numbers are still shocking.

IMF expects that the world economy will contract by 4.9% in 2020 before rebounding by 5.4% in 2021. The situation looks much worse for the developed world.

The U.S. GDP is expected to decline by 8% in 2020 and rebound by 4.5% in 2021. The Euro Area will suffer a blow of 10.2% this year before rebounding by 6% in 2021. Canada GDP is projected to decrease by 8.4% in 2020 and rebound by 4.9% in the next year.

Put simply, IMF does not expect that the world economy will return to pre-crisis levels before 2022. Such forecasts support safe haven currencies like the U.S. dollar.

Another problem for the Canadian dollar is the sell-off in the oil market. Oil is under significant pressure after EIA Weekly Petroleum Status Report showed that U.S. crude oil inventories increased by 1.4 million barrels while the U.S. oil production has suddenly increased by 0.5 million barrels per day.

Technical Analysis

USD/CAD is once again trying to settle above the 20 EMA near 1.3600. The previous attempts to settle above the 20 EMA were not successful, but this time USD/CAD may have better chances amid worries about the second wave of coronavirus and gloomy economic forecast from IMF.

If this happens, USD/CAD will likely get additional upside momentum and head towards the 50 EMA which has declined to 1.3710. Such an upside move may take time so the resistance at the 50 EMA may be faced at lower levels.

On the support side, the nearest support level at 1.3500 has recently been tested and proved its strength. A move below 1.3500 will signal a continuation of the previous downside trend and open the way to the next support level at 1.3440.

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