USD/CAD Daily Forecast – U.S. Dollar Holds Its Ground After Yesterday’s Upside Move

USD/CAD Video 12.06.20.

Fears About The Second Wave Of Coronavirus Provide Support For Safe Haven Assets

USD/CAD tries to settle above 1.3600 as equity market optimism starts to fade while oil fails to rebound after yesterday’s sell-off.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has managed to continue the upside move and is trying to settle above 97.

Just a few days ago, the U.S. Dollar Index was testing levels below 96, so the American currency is making a material comeback despite Fed’s promise to avoid raising rates through 2022 and the continuation of the unprecedented monetary stimulus.

The key reason for the strength of the U.S. dollar is the increase in demand for safe haven assets amid fears about the second wave of coronavirus. Now that many economies have lifted lockdown measures, the number of new infections is rising in many places around the world.

China has recently shut six food markets as two coronavirus cases were recorded in the country’s capital. India has recorded a record daily increase in coronavirus cases, while some U.S. states see an increase in coronavirus-related hospitalizations.

It remains to be seen whether the fears of the second wave will lead to a sustainable increase in demand for safe haven assets, which would be bullish for USD/CAD.

Technical Analysis

USD/CAD met significant resistance at the 20 EMA at 1.3635 but stays above 1.3600. In case USD/CAD manages to settle above the 20 EMA, it will likely gain additional upside momentum and head towards the major resistance level at 1.3730.

The 50 EMA is currently located at 1.3785 but it will have the time to decline closer to 1.3730 when USD/CAD will be able to test this level. In this light, I’d expect material resistance at 1.3730.

On the support side, USD/CAD may get some support near 1.3570 but the first material support level is located at 1.3500. If USD/CAD settles below 1.3500, it will head towards the next material support level at 1.3360.

At this point, USD/CAD has good chances to establish a new upside trend if it keeps the current momentum and heads towards the test of the next material resistance level at 1.3730.

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