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USD/CAD Daily Forecast – Canadian Dollar Supported By Economic Data

Vladimir Zernov
·3-min read

USD/CAD Video 01.07.20.

Canadian Dollar Is Supported By Increased Demand For Riskier Assets

USD/CAD continues to trend down as the U.S. dollar is losing ground against a broad basket of currencies after the release of U.S. economic data.

The U.S. Dollar Index has once again failed to settle above the key resistance at 97.5 and declined closer to the 97 level.

U.S. ADP Employment Change report was worse than expectations as it showed that 2.37 million jobs were created in the private sector in June compared to analyst consensus of 3 million. However, the report for May was revised from -2.76 million to 3.07 million.

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U.S. Manufacturing PMI increased from 39.8 in May to 49.8 in June. ISM Manufacturing PMI report was even more bullish for riskier assets as it showed that PMI increased from 43.1 in May to 52.6 in June. Numbers below 50 show contraction.

Another factor that supported riskier assets today was the announcement of preliminary results for Phase 1/2 trial of COVID-19 vaccine from Pfizer and BioNtech SE which showed promising results.

Canadian dollar could have received more support but oil failed to settle above the $40 level. Such a move would have been bullish for all commodity-related currencies.

The main risk for the Canadian dollar right now is the worsening situation on the coronavirus front which can ultimately offset the optimism about the better-than-expected economic data.

Technical Analysis

USD/CAD has settled below the 20 EMA at 1.3615 and is back into the range between 1.3500 and the 20 EMA. Previously, USD/CAD spent many trading sessions in this range, and it is possible that the same pattern will present itself this time in case bullish and bearish factors are balanced.

In case USD/CAD manages to get above the 20 EMA, it will find itself in a new trading range between the 20 EMA at 1.3615 and the 50 EMA at 1.3700. The 50 EMA is set to decline lower so this range will get tighter over time.

On the support side, the nearest support for USD/CAD is located at 1.3500. A move below this level will signal the continuation of the previous downside trend. In this scenario, USD/CAD will get additional downside momentum and head towards the next support level at 1.3440.

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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