The Canadian Dollar Tries To Overcome The Negative Impact Of Oil Price Dynamics
The U.S. dollar broke a losing streak and finally managed to rebound a bit. The U.S. Dollar Index managed to rebound from the 99 level and current stays in the 99 – 100 range.
A key factor playing against the Canadian dollar today is oil, which has recently breached the $23 support level and experienced increased selling pressure due to worries about future oil demand.
Meanwhile, the U.S. is now the country with the biggest number of coronavirus cases. As much as 86,012 cases have been registered in the U.S. according to data from Johns Hopkins University. In Canada, there are just 4,046 coronavirus cases.
It remains to be seen whether the spread of the virus in the U.S. will hurt the status of the U.S. dollar as a safe haven asset of last resort. In recent days, optimism in the world markets correlated with the weakness of the American currency.
Despite a combination of a negative day in the world markets and weaker oil, the rebound in USD/CAD is not as strong as it could have been after the major downside move of the past few days. Potentially, this signals that the Canadian dollar can show more strength if the external factors are favorable.
Yesterday, I indicated that it USD/CAD will find it hard to settle below the 20 EMA without any correction due to the speed of the previous downside move. Today, this support level got confirmed, as the pair continues to get support in the 1.4030 area.
The resistance level at 1.4150 got confirmed as well. USD/CAD tried to get past this level as oil prices dropped closer to new lows, but got stopped and headed back to the support level near the 20 EMA.
In case USD/CAD manages to settle below the 20 EMA, it will have more room to the downside since the next material support level is near 1.3800. On the upside, the 1.4330 level remains the major obstacle for USD/CAD. However, the resistance level at 1.4150 should be breached first before the pair can try to test the 1.4330 resistance.
This article was originally posted on FX Empire
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