Yesterday, I wrote that traders will have to watch whether the previous low at 1.4420 could hold since USD/CAD had no material support levels in the nearby following a major rally from 1.4000 to 1.4667.
The minor support level at 1.4420 did not hold, and the sell-off in USD/CAD intensified – the pair even reached 1.4150 before rebounding closer to 1.4350.
This rapid action was induced by major swings in the oil price and the U.S. Dollar Index. Oil prices continued their yesterday’s rebound on hopes that the U.S. will put pressure on Saudi Arabia and Russia so that they cut oil production, but then have lost their gains as worries about future oil demand resurfaced.
The U.S. Dollar Index also had a very volatile day and finally corrected closer to 102, which is not surprising since the index had no meaningful pullbacks in a rally from 95 to almost 104.
Fundamental data from Canada also supported the Canadian dollar. Yesterday, the New Housing Price Index showed healthy growth of 0.6% year-over-year, while today’s retail sales report indicated growth of 3.4% year-over-year in January 2020.
In short, USD/CAD got too stretched, and a mix of technical and fundamental factors led to a very material pullback. The situation in the world changes daily due to the ongoing coronavirus crisis, and the pair will likely continue to experience outsized volatility.
Following recent moves, USD/CAD settled in a very wide range. The pair has met resistance in the 1.4650 – 1.4670 area, while support was provided in the 1.4150 – 1.4170 range.
I’d also note that minor support exists in the 1.4250 – 1.4270 range, while the previous support level at 1.4420 has turned into resistance.
Both the fundamental and technical factors support increased volatility in the following trading days. The recent upside and downside moves in USD/CAD were very fast, which did not allow strong technical levels to be established.
In addition, the ongoing coronavirus crisis and the announced virus containment measures change investors’ risk appetite on a daily basis, which has profound impact on the strength of the U.S. dollar and the price of oil, which are currently the key drivers for USD/CAD volatility. Be prepared for fast moves in the coming days.
This article was originally posted on FX Empire
More From FXEMPIRE:
- Natural Gas Price Fundamental Daily Forecast – Staggering Demand Loss Expectations Weighing on Prices
- Natural Gas Price Prediction – Prices Drop to Historic All-time Lose Close
- EUR/USD Mid-Session Technical Analysis for March 20, 2020
- Gold Weekly Price Forecast – Gold Markets Showing Signs of Support
- GBP/USD Weekly Price Forecast – British Pound Has Rough Week Against Greenback
- S&P 500 Price Forecast – Stock Markets Limp Into the Weekend