USD/CAD Daily Forecast – U.S. Dollar Pulls Back After Yesterday’s Move

USD/CAD Video 16.10.20.

Canadian Dollar Is Strong Ahead Of The Weekend

USD/CAD is currently trying to settle below 1.3200 as the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to get below the nearest support level at the 20 EMA at 93.55 but did not manage to gain sufficient downside momentum.

If the U.S. Dollar Index moves below the 20 EMA, it will head towards the next support near 93.30 which will be bullish for currencies which are linked to natural resources like the Canadian dollar.

Today, U.S. reported that Retail Sales increased by 1.9% month-over-month in September compared to analyst consensus which called for growth of 0.7%. Meanwhile, the preliminary reading of Michigan Consumer Sentiment indicated that Consumer Sentiment increased from 80.4 in September to 81.2 in October.

Consumer-related reports were surprisingly strong since U.S. Republicans and Democrats failed to reach consensus on the new coronavirus aid package.

U.S. Industrial Production declined by 0.6% month-over-month compared to analyst consensus which called for growth of 0.5%. Manufacturing Production also declined by 0.3%.

Industrial Production and Manufacturing Production reports were disappointing but it remains to be seen whether they highlighted temporary problems or showed a beginning of a new downside trend.

Technical Analysis

USD to CAD is testing the support level at 1.3200. If this test is successful, USD to CAD will gain additional downside momentum and head towards the next support level at 1.3135. There are no material levels between 1.3135 and 1.3200 so this move may be fast.

If USD to CAD manages to settle below the support at 1.3135, it will decline towards the next support level at October lows at 1.3100.

On the upside, USD to CAD needs to stay above the support at 1.3200 in order to continue its rebound. The nearest resistance level for USD to CAD is located at the 20 EMA near 1.3220.

A move above the 20 EMA will signal that USD to CAD is ready to develop additional upside momentum. In this case, USD to CAD will head towards the next resistance level at the 50 EMA near 1.3250.

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