USD/CAD Daily Forecast – Canadian Dollar Loses Ground As Oil Pulls Back From Recent Highs

USD/CAD Video 06.05.20.

Stronger U.S. Dollar And Lower Oil Boost USD/CAD

USD/CAD is gaining ground as continued U.S. dollar strength against a broad basket of currencies and weakness on the oil price front create a perfect setup for USD/CAD upside.

The U.S. Dollar Index has breached the psychologically important 100 level and heads towards major resistance at 101.

The U.S. has recently released ADP Employment Change report for April which highlighted the huge hit to employment due to coronavirus containment measures, and the U.S. dollar received additional support as the safe haven asset of last resort.

Recently, Canadian heavy oil had a material rebound due to supply cuts but it remains to be seen whether this rebound is sustainable. Currently, the Canadian Crude Index is losing ground together with major benchmarks like WTI and Brent as traders take profits after the recent rally.

From a fundamental point of view, another increase in demand for safe haven assets may push USD/CAD above the major resistance level at 1.4250, but it is unclear whether such increase will happen despite the bad economic data that we get on a daily basis.

The markets look into the future rather than the past, and the current consensus implies that the massive stimulus measures from the world’s governments and central banks will ensure a speedy recovery from the deep crisis.

In case actual economic data contradicts this narrative, USD/CAD may experience another major upside move.

Technical Analysis

usd cad may 6 2020

USD/CAD is currently trying to settle above the resistance at 1.4150. In case the test of this level is successful, the pair will head towards the major resistance level at 1.4250.

USD/CAD will likely need significant upside catalysts to breach the resistance at 1.4250 but if it happens, the pair may quickly find itself at the next resistance level at 1.4330.

In case the test of the 1.4150 level is not successful, the current local downside channel will stay intact.

In this case, the next support for USD/CAD is located at the 20 EMA at 1.4060, followed by the 50 EMA at 1.3970. The ultimate support for the pair is at 1.3850. In case USD/CAD manages to get below this level, it will likely gain rapid downside momentum.