USD/CAD Daily Forecast – Weaker Oil Puts Pressure On Canadian Dollar

USD/CAD Video 22.05.20.

U.S. Dollar Continues To Rebound From The Major Support Level

USD/CAD got back above 1.4000 as the U.S. dollar gained ground against a broad basket of currencies while the Canadian dollar found itself under pressure due to the sell-off in the oil market.

The U.S. Dollar Index has found material support near the 99 level and has rebounded towards the 100 level. The U.S. Dollar Index continues to stay in the range between 99 and 101, and a move out of this range will likely be required for a decisive move in USD/CAD.

The demand for safe haven assets is increasing as China decided to drop its annual GDP target while U.S. – China tensions continued to increase. The recent developments in China put pressure on oil, while weaker oil contributed to weakness of the Canadian dollar.

Canada has recently reported its Retail Sales data for March. Retail Sales were down 8.4% on a year-over-year basis and declined by 10% on a month-over-month basis.

Almost all of the decline was attributed to the decrease in auto sales since Retail Sales excluding Autos were down just 0.4%.

Traders and investors should note that Canada reported data for March while most developed countries have already reported Retail Sales data for April so Canada’s numbers are not directly comparable to recent reports by other countries.

Technical Analysis

 

USD/CAD continues to rebound from the strong support level at 1.3850. The pair has already managed to get above the 50 EMA at 1.3985 and the 20 EMA at 1.4010.

The next resistance for USD/CAD is located at 1.4150. The two previous rebounds in USD/CAD were stopped at this level, so it is a material obstacle on the pair’s way to the major resistance at 1.4250.

I maintain my view that USD/CAD will need additional upside catalysts to get a realistic chance to get through the resistance at 1.4250. Such catalysts could include a major sell-off in the oil market or a rush to safety in the world markets which would provide additional demand for safe haven assets like the U.S. dollar.

On the support side, USD/CAD has a major support area between 1.3850 and 1.3900 while levels that are located above this area are much weaker. From a big picture point of view, the pair stays range-bound between 1.3850 and 1.4250.