USD/CAD Daily Forecast – U.S. Dollar Rebounds After Yesterday’s Sell-Off

USD/CAD Video 16.12.20.

Canadian Dollar Is Under Pressure

USD/CAD is currently trying to settle above the resistance at 1.2750 after an unsuccessful attempt to settle below the support at 1.2700 while the U.S. dollar is trying to gain some ground against a broad basket of currencies.

The U.S. Dollar Index managed to get below the support at 90.50 and declined to 90.13 but then rebounded closer to 90.40. The U.S. dollar is volatile ahead of the U.S. Fed Interest Rate Decision. Traders will pay attention to the subsequent commentary from the world’s most important central bank which may have a big impact on the foreign exchange market.

Today, Canada reported that Inflation Rate increased by 1% year-over-year in November compared to analyst consensus of 0.8%. Core Inflation Rate grew by 1.5%.

In the U.S., Retail Sales surprisingly decreased by 1.1% while analysts expected that they would decline by 0.3%. The report showed that consumer activity slowed down due to the negative impact of the pandemic and highlighted the need for another round of economic stimulus. According to recent reports, U.S. lawmakers are close to a compromise on a $900 billion coronavirus aid package.

In addition to the latest Retail Sales data, traders had a chance to take a look at flash PMI reports for December. U.S. Manufacturing PMI decreased from 56.7 to 56.5 while U.S. Services PMI declined from 58.4 to 55.3. Numbers above 50 show expansion.

Technical Analysis

USD to CAD gained upside momentum and is currently testing the nearest resistance level at 1.2750. If USD to CAD manages to settle above this level, it will head towards the next resistance at 1.2775.

A successful test of the resistance at 1.2775 will open the way to the next resistance at 1.2800. A move above 1.2800 will push USD to CAD towards the resistance level at 1.2835.

On the support side, the nearest support level for USD to CAD is located at 1.2720. In case USD to CAD declines below 1.2720, it will move towards the support at 1.2700. This support level has been tested during yesterday’s trading session and proved its strength. A move below 1.2700 will push USD to CAD towards the next support at 1.2675.

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