USD/CAD Daily Forecast – U.S. Dollar Remains Under Pressure

USD/CAD Video 03.06.20.

Demand For Riskier Assets Provides Additional Upside To The Canadian Dollar

USD/CAD continues its attempts to settle below 1.3500 as the U.S. dollar loses ground against a broad basket of currencies while oil is mixed on doubts about early OPEC+ meeting.

The U.S. Dollar Index is losing ground after the release of a better-than-expected ADP Employment Change report which provided material support to riskier assets.

The U.S. Dollar has recently moved below the 99 level and has already settled below 97.5 without any pullback.

U.S. PMI data was also ahead of analyst expectations. Services PMI increased to 37.5 in May while Composite PMI grew to 37.0.

Together, the optimistic ADP Employment Change and PMI reports provided a major boost to global markets. As a result, traditional safe haven assets like the U.S. dollar or precious metals found themselves under pressure.

Oil is also providing support to the Canadian dollar as recovery hopes offset fears that OPEC+ members will not reach consensus on the extension of current production cuts.

In general, the setup remains favorable for riskier, commodity-related currencies like the Canadian dollar, so it’s not surprising to see material weakness in USD/CAD.

In this light, traders should keep an eye on the general sentiment in the world markets as it is the main catalyst for USD/CAD right now.

Technical Analysis

USD/CAD tested the nearest resistance at 1.3570 but failed to settle above it. Currently, USD/CAD is trying to settle below 1.3500. If this attempt is successful, USD/CAD will head towards the next support level at 1.3440. I’d note that RSI is getting close to the oversold territory so the risks of a rebound are increasing.

At the same time, USD/CAD dynamics are part of a major global risk-on trend so minor oversold conditions may be ignored by the market.

In case USD/CAD settles below the next support at 1.3440, it will be ready to move towards the following support level at 1.3335.

On the upside, the nearest resistance is at 1.3570. A move above this resistance could lead to increased upside momentum, taking USD/CAD closer to the major resistance level at 1.3730.

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