USD/CAD Daily Forecast – U.S. Dollar Gains Ground As Virus Worries Return

USD/CAD Video 09.07.20.

WTI Oil Falls Below The $40 Level And Puts Additional Pressure On The Canadian Dollar

USD/CAD managed to rebound from the support level at 1.3500 but stays below the 20 EMA at 1.3590 as the U.S. dollar is gaining ground against a broad basket of currencies while oil is under pressure.

Earlier, the U.S. dollar experienced weakness as the market mood was positive following the release of better-than-expected U.S. Initial Jobless Claims and Continuing Jobless Claims reports.

The Initial Jobless Claims report showed that 1.31 million Americans filed for unemployment benefits in a week. Meanwhile, Continuing Jobless Claims dropped to 18.1 million as some workers managed to find new jobs.

However, market sentiment changed quickly after the release of U.S. employment reports as traders focused on the worsening coronavirus situation in the U.S. On Wednesday, the U.S. has registered more than 60,000 new cases of the disease.

Renewed worries about potential lockdowns increased demand for safe haven assets and provided support to the U.S. dollar.

At the same time, the Canadian dollar found itself under pressure as WTI oil fell below the key $40 level. There was no specific catalyst for this move, and it looks like general virus worries put pressure on oil.

Canadian oil benchmarks mostly trade in sync with the leading world benchmarks like Brent and WTI so the downside move of WTI oil is negative for the Canadian dollar.

Technical Analysis

USD to CAD continues to trade in a range between the support at 1.3500 and the resistance at the 50 EMA at 1.3590. Recent trading sessions have been volatile but USD to CAD did not manage to get out of this range.

In case USD to CAD manages to settle above the 20 EMA, it will likely develop upside momentum and head towards the next resistance level at the 50 EMA which has declined to 1.3665.

On the support side, USD/CAD will need to settle below 1.3500 to gain downside momentum. A move below this level will be a material bearish development for USD/CAD which will head towards the next support level at 1.3440.

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