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USD/CAD Daily Forecast – Canadian Dollar Enjoys Upside

Vladimir Zernov

USD/CAD Video 18.05.20.

Canadian Dollar Is Boosted By Risk-On Mode In The Global Markets

USD/CAD is pulling back after recent upside as stronger oil continues to support the Canadian dollar while global market optimism puts pressure on the U.S. dollar.

The U.S. dollar is losing ground against a broad basket of currencies, and the U.S. Dollar Index has declined to the 100 level.

The news about a potential vaccine for COVID-19 pushed the world markets to the upside so the demand for save haven assets like the U.S. dollar has decreased.

With no important economic reports scheduled for today, USD/CAD dynamics depend on the general market mood and technicals.

The U.S. dollar is hurt by the sell-off in the safe haven asset space. Both the American currency and the American government bonds are declining as investors buy riskier assets in a bet on a speedy recovery from the coronavirus crisis.

Meanwhile, oil enjoys a boost and provides support for the Canadian dollar. The situation in the oil market has normalized, and the Canadian benchmarks are back to reasonable levels after suffering unprecedented downside together with the WTI May 2020 contract which went into the negative territory ahead of its settlement date.

A continuation of the oil rally will likely put more pressure on USD/CAD and push the pair closer to the support level at 1.3850.

Technical Analysis

From a big picture point of view, USD/CAD continues to trade in a range between the support level at 1.3850 and the resistance level at 1.4250. However, each consecutive rebound from the support area between 1.3850 and 1.3900 was met with resistance at a lower level.

This pattern of lower highs is a bearish signal for USD/CAD. In case the test of the 50 EMA level at 1.3990 is successful, the pair will head towards the next support level at 1.3900.

In case USD/CAD manages to settle below 1.3900, it will have a chance to test the major support level at 1.3850. A breach of this support level will lead to increased downside momentum in USD/CAD.

On the upside, the nearest resistance for USD/CAD is located at the 20 EMA level at 1.4040. In case USD/CAD manages to settle above the 20 EMA, the next resistance will be located at the high of the recent rebound at 1.4150.

This article was originally posted on FX Empire