USD/CAD Daily Forecast – Test Of Support At 1.3440
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There are two main catalysts for this move. First, riskier assets got a major boost from a EU recovery fund deal which established a 750 billion euro coronavirus recovery fund. The prospect of additional money-printing provided significant support to most asset classes today.
Second, oil has finally managed to get above the resistance at $41.50 and gained upside momentum. Oil price upside served as a material upside catalyst for commodity-related currencies including Canadian dollar.
Meanwhile, the U.S. Dollar Index has declined below the lows that were reached back in June and is heading towards the 95 level. The U.S. Dollar Index briefly visited sub-95 territory back in March but quickly rebounded as the American currency benefited from increased demand for safe haven assets.
It won’t be easy to repeat this rebound since safe haven buying has shifted to precious metals which are boosted by never-ending money printing from the world central banks.
Today, both gold and silver rallied, highlighting their role as a store of value at times when governments rush to borrow huge sums of money. It remains to be seen when the U.S. dollar will be able to break the current bearish sentiment. At this point, Canadian dollar has good chances for additional upside.
Technical Analysis
USD to CAD has finally moved out of the range between the support at 1.3500 and the resistance at the 20 EMA at 1.3565. Not surprisingly, a move below the support at 1.3500 has led to a sell-off, and USD to CAD has quickly reached the next support level at 1.3440.
In case USD to CAD manages to settle below 1.3440, it will continue its downside move and head towards the next support level at 1.3360.
On the upside, the previous support level at 1.3500 has decent chances to become a serious resistance level for USD to CAD, followed by the next resistance level at the 20 EMA at 1.3565.
For a look at all of today’s economic events, check out our economic calendar.