USD/CAD Daily Forecast – The 20 EMA Level Is A True Wall
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The U.S. Dollar Index failed to settle above the resistance at 97.5 and developed downside momentum. Currently, the U.S. Dollar Index has settled closer to the 97 level which is a bearish development for USD/CAD.
Today, the U.S. reported Existing Home Sales for May which declined by 9.7% on a month-over-month basis. Analysts expected a contraction of 3%. In total, 3.91 million existing homes were sold, compared to 5.76 million in February, before the acute phase of the coronavirus crisis.
Oil provides additional support to the Canadian dollar as tries to settle above the psychologically important $40 level. If this attempt is successful, oil will likely develop additional upside momentum which would be bullish for the Canadian dollar. In this scenario, USD/CAD could move below the support at 1.3500.
Interestingly, the U.S. dollar did not get support from the worsening situation on the coronavirus front. The World Health Organization reported a record daily increase in coronavirus cases on Sunday, but traders moved to gold instead of U.S. dollar in search for safe haven investments.
If this trend continues, the U.S. dollar may find itself under more pressure as gold will attract more safe-haven buying.
Technical Analysis
USD/CAD failed to settle above the 20 EMA and found itself under some pressure. USD/CAD continues to trade in the range between 1.3500 and 1.3610 and will likely need additional catalysts to move out of this range.
In case USD/CAD gets above the 20 EMA, it will gain upside momentum and head towards the major resistance level at 1.3730. Given the length of the current consolidation phase, I would not expect material resistance near recent highs at 1.3690.
On the support side, a move below 1.3500 will signal a return of the previous downside trend. In this scenario, USD/CAD may quickly head towards the test of the support level at 1.3440.
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