Canadian Dollar Gains Ground As Demand For Riskier Assets Remains Strong
USD/CAD is still stuck in the range between the support level at 1.3500 and the resistance level at the 20 EMA at 1.3590 as the U.S. dollar loses ground against a broad basket of currencies while WTI oil continues to trade above the $40 level.
With no important economic reports scheduled to be released today, USD/CAD trading dynamics will depend mostly on market sentiment.
The U.S. Dollar Index has settled below 96.5 and continues its downside move as traders remain optimistic ahead of the active phase of the second quarter U.S. earnings season.
In addition, hopes for a vaccine against COVID-19 have managed to offset the negative data on the virus front. On Sunday, the World Health Organization has reported a record daily increase in the number of new coronavirus cases. Meanwhile, WHO Director General stated that the situation was getting worse.
However, such warnings did not put any pressure on riskier assets as traders continue to bet on a fast economic recovery. Recently, oil tried to settle below the $40 level but quickly returned back above $40, providing additional support to the Canadian dollar.
While the global market optimism is bearish for the U.S. dollar which has played the role of a safe haven asset of last resort during the current crisis, USD/CAD will need additional catalysts to get out of the current range and gain more momentum.
Technical Analysis
USD to CAD has recently made an attempt to settle above the 20 EMA at 1.3590 but this attempt was not successful so USD to CAD returned back to the previous trading range.
In case USD to CAD manages to settle above the 20 EMA, it will head towards the next resistance level at the 50 EMA at 1.3655.
The 50 EMA has served as a serious resistance level during the previous upside move which was stopped above 1.3700, and I expect that it will remain a significant obstacle on the way up.
On the support side, a move below 1.3500 will lead to increased downside momentum and push USD to CAD towards the next support level at 1.3440.
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