USD/CAD Daily Forecast – U.S. Dollar Is Under Pressure As Powell Stays Dovish

U.S. Dollar Declines Against Canadian Dollar

USD/CAD is currently trying to settle back below 1.2625 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get below the 20 EMA at 92.85 and is moving lower. The next material support level for the U.S. Dollar Index is located at the 50 EMA near 92.45. If the U.S. Dollar Index gets to the test of this level, USD/CAD will find itself under more pressure.

Fed Chair Jerome Powell has recently stated that the U.S. economy made progress towards Fed’s goals which included price stability and full employment. However, the spread of the Delta variant remained a significant concern for the Fed. Powell also added that taking away Fed stimulus too early would be harmful. Put simply, Powell’s speech was very dovish. Not surprisingly, such comments put significant pressure on the American currency.

Meanwhile, Canadian dollar got additional support from rising oil prices. WTI oil has recently made an attempt to settle above the $69 level as traders rushed to buy oil due to hurricane risk in the Gulf of Mexico. If WTI oil gets to the test of the $70 level, commodity-related currencies will get more support.

Technical Analysis

USD to CAD declined below the support at 1.2650 and is testing the next support level at the 20 EMA at 1.2625. In case USD to CAD settles back below this level, it will move towards the next support at 1.2590.

A move below the support at 1.2590 will push USD to CAD towards the next support level at the 50 EMA at 1.2550. If USD to CAD declines below 1.2550, it will move towards the support at 1.2530.

On the upside, USD to CAD needs to stay above the 20 EMA to have a chance to rebound in the near term. The next resistance level for USD to CAD is located at 1.2650.

If USD to CAD settles above this level, it will head towards the resistance at 1.2685. A successful test of the resistance at 1.2685 will open the way to the test of the next resistance level which is located at the recent highs at 1.2710.

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