USD/CAD Daily Forecast – U.S. Dollar Gains Some Ground On Labor Day

USD/CAD Video 07.09.20.

Weak Oil Puts Some Pressure On The Canadian Dollar

USD/CAD continues to trade below 1.3100 as the U.S. dollar is flat against a broad basket of currencies while WTI oil is trying to settle below the $39 level.

U.S. financial markets are closed in observance of Labor Day, and there are no important economic reports that will impact USD/CAD trading dynamics.

In this situation, traders will focus on the upcoming Bank of Canada Interest Rate Decision which is scheduled to be announced on Wednesday.

The interest rate is projected to stay intact at 0.25% but traders will keep a close eye on central bank’s comments.

The U.S. Fed put significant pressure on other central banks around the world when it announced its decision to adopt an average inflation target of 2%. This decision means that U.S. interest rates will stay low for years.

In case other central banks do not adopt similar measures, their currencies may continue to gain ground against the U.S. dollar which will be a problem for their export-oriented industries.

USD/CAD has already declined from 1.4667 in mid-March to 1.2994 at the beginning of September, and additional strength of the Canadian dollar may put pressure on the fragile recovery of Canada’s economy. However, it remains to be seen whether Bank of Canada has much room for maneuver.

Technical Analysis

USD to CAD made an attempt to settle above 1.3100 but did not manage to gain sufficient upside momentum. The nearest resistance level for USD to CAD is still located at 1.3135.

The 20 EMA is located very close to this level so the resistance at 1.3135 is set to be a very serious obstacle on the way up for USD to CAD.

In case USD to CAD manages to settle above this resistance level, it will head towards the next major resistance at 1.3235.

On the support side, the nearest support level is located at 1.3050. If USD to CAD gets below this level, it will gain more downside momentum and head towards the test of the recent lows at 1.3000.

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