USD/CAD Video 27.05.20.
Lower Oil Puts Pressure On The Canadian Dollar
USD/CAD is rebounding after yesterday’s major downside move as the U.S. dollar is gaining strength against a broad basket of currencies while oil is losing ground due to increase in U.S. – China tensions.
U.S. Dollar Index has recently tried to settle below the key 99 level but faced significant support and rebounded back above 99. A move below 99 would have been bearish for USD/CAD as it would have signaled broad U.S. dollar weakness.
In addition to the rebound of the U.S. dollar, oil is under pressure, which is a bearish catalyst for the Canadian currency.
Canada has recently reported that Building Permits declined by 17.1% month-over month in April which is not surprising given the significant pressure from coronavirus-related measures.
Interestingly, the Bank of Canada stated that it could provide additional monetary stimulus if necessary. The Bank of Canada maintains its 2% inflation target, although the near-term challenge is to avoid deflation.
USD/CAD has recently breached the important support level at 1.3850 and gained downside momentum. Today, USD/CAD is trying to rebound after this material downside move.
The nearest resistance for USD/CAD is located at the previous support level at 1.3850. I’d expect very material interest from traders in case USD/CAD gets back to this level.
Previously, USD/CAD was in a wide trading range between 1.3850 and 1.4250, and a move out of this range is a major development.
In case USD/CAD manages to get above 1.3850, it will likely gain additional upside momentum and head towards the next resistance level at the 50 EMA at 1.3970.
On the downside, the nearest support level is located at the recent lows at 1.3730. The 20 EMA is about to cross the 50 EMA to the downside, suggesting the continuation of the current momentum. Thus, a test of the nearest support level is likely unless the U.S. dollar gets too much support from the demand for safe haven assets.
In case USD/CAD manages to settle below 1.3730, it will gain additional downside momentum and head towards the next support level at 1.3650.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
More From FXEMPIRE:
- GBP/USD Price Forecast – Pound Rolls Over After Brexit Comments
- U.S. Dollar Index (DX) Futures Technical Analysis – In Position to Post Closing Price Reversal Bottom
- Crude Oil Price Update – Momentum Could Shift Lower Under $32.77
- Gold Price Forecast – Gold Markets Show Resiliency
- Crude Oil Price Forecast – Crude Oil Markets Continue to Press Gap Above
- Oil Price Fundamental Daily Forecast – API Report Expected to Show 2.5M Barrel Draw