USD/CAD Daily Forecast – Virus Worries Push U.S. Dollar HigherUSD/CAD gains ground as global markets turn red amidst worsening situation with coronavirus.
Risk-Off Mode Helps U.S. Dollar
USD/CAD moved higher as riskier assets experienced sell-off due to coronavirus-related worries. Three countries – U.S., Italy and Spain – have more than 100,000 cases each, and the U.S. is close to 200,000 cases.
Recently, German Chancellor Angela Merkel indicated that social distancing measures will be in place until April 19, 2020, and it looks like most developed economies will spend the full month of April under lockdowns of various severity.
In such environment, investors and traders turn to U.S. dollar as the safe haven asset of last resort, and the U.S. Dollar Index has tried to breach the psychologically important 100 mark today.
Both U.S. and Canada reported Manufacturing PMI numbers for March. Not surprisingly, both reports showed contraction of manufacturing activity. Investors should expect that Manufacturing PMI for April will look even worse given the current virus containment measures.
The key question of the recent days was whether the U.S. dollar would maintain its status of the safe haven asset of last resort as the coronavirus situation in the U.S. continued to deteriorate.
At this point, this status is confirmed, and the U.S. dollar is gaining ground against a broad basket of currencies at a time when the market is worried about the impact of coronavirus-related measures on the economy.
Currently, this is a bullish factor for USD/CAD which continues to receive buyer support following the downside move of the past week.
USD/CAD received material support near the 20 EMA at 1.4070. This support level is located at the lower end of the newly formed upside channel. If this support is breached, USD/CAD may try to move towards the 50 EMA at 1.3750.
However, it will first have to go through the next support level at 1.3925, which could be a problem given the fact that markets are returning to risk-off mode amidst worsening coronavirus data.
On the upside, the previous resistance level at 1.4150 has ceased to exist. The pair has moved through it like knife through butter for too many times for it to stay relevant.
The next major resistance level is located at 1.4330. If this level is breached, USD/CAD will likely head towards 1.4500.