USD/CAD Daily Forecast – U.S. Dollar Rebounds Amid Demand For Safe Haven Assets

USD/CAD Video 11.05.20.

Canadian Dollar Loses Ground As Traders Prefer Less Risky Assets

USD/CAD is gaining ground today as markets are cautious about a potential second wave of coronavirus while oil fails to show upside following Saudi Arabia’s decision to support the market with an additional production cut of 1 million barrels per day.

The U.S. dollar, which has served as the safe haven asset of last resort during the current crisis, is gaining ground against a broad basket of currencies. The U.S. Dollar Index has firmly settled above the 100 mark.

The U.S. Dollar Index remains in the range between 99 and 101. A move out of this range will likely lead to increased momentum so traders should watch it closely.

Neither U.S. nor Canada will publish any material economic news today so USD/CAD trading will depend on technicals, general market mood and oil price dynamics.

It will be interesting to see whether market fears about a potential second wave of coronavirus will turn into something more serious than a limited one-day sell-off and provide more support for the U.S. dollar.

As I stated many times, USD/CAD will need a very strong catalyst to get above the resistance level at 1.4250, and fears about the second wave of the virus might serve as such a catalyst.

Technical Analysis

USD/CAD continues to trade in a range between the support level at 1.3850 and the resistance level at 1.4250. The pair has previously shown a pattern of lower highs since each rebound from the support level at 1.3850 ended at lower levels.

In this light, it looked like USD/CAD had a decent chance to test the support at 1.3850 for the third time with better chances to settle below this level.

However, the rush to safety due to worries about a second wave of coronavirus did not allow USD/CAD to test the major support level and the pair is back closer to the center of the trading range.

The nearest resistance for USD/CAD is located at 1.4150, while the ultimate resistance is at 1.4250. I maintain my view that USD/CAD will need significant upside catalysts to get a chance to settle above 1.4250.