USD/CAD Video 26.05.20.
U.S. Dollar Loses Ground As Demand For Safe Haven Assets Decreases
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has declined to the 99 level, which is the low end of the current range.
Unexpectedly, U.S. New Home Sales increased by 0.6% month-over-month in April compared to analyst consensus which called for a decline of as much as 21.9%.
The U.S. New Home Sales data provided additional support for riskier assets like the Canadian dollar and put pressure on safe haven assets like the U.S. dollar.
Oil is holding well following the recent upside move and provides additional support to the Canadian currency.
The pattern of lower highs, which I highlighted in my previous articles on USD/CAD, has finally played out, and USD/CAD has breached the major support level at 1.3850.
The move was very significant since USD/CAD started the day near the 50 EMA level at 1.3980 but then tested the 1.3800 level.
The global pressure on the U.S. dollar served as a major catalyst for this move, although I’d note that the U.S. Dollar Index is still inside the previous range between 99 and 101.
A potential rebound of the U.S. Dollar Index is a material risk factor for USD/CAD bears.
Now that USD/CAD got below the support at 1.3850, it will have to settle at these lower levels to get a chance to continue the downside trend. If this happens, USD/CAD will head towards the next material support level at 1.3750.
On the upside, the previous support at 1.3850 will turn into a material resistance level. If USD/CAD manages to get above 1.3850, it will signal a fake breakout, which would serve as a bullish catalyst.
In this scenario, USD/CAD will get significant upside momentum. The next resistance for USD/CAD is located at the 50 EMA at 1.3980 since no material levels were formed between the major support at 1.3850 and the 50 EMA.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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