USD/CAD Daily Forecast – Attempt To Test The 50 EMA Level Is Not Successful

U.S. Dollar Tries To Gain More Upside Momentum

USD/CAD continues its attempts to settle above the 20 EMA at 1.3590 despite the fact that the U.S. dollar is showing weakness against a broad basket of currencies while oil stays glued to the $40 level.

The U.S. Dollar Index has settled below the 96.5 level and continues to move lower. Renewed virus worries related to California’s decision to reimpose some virus containment measures failed to provide additional support to the American currency which served as a safe haven asset of last resort during the current crisis.

The U.S. has recently provided Inflation Rate and Core Inflation Rate reports for June which were a bit higher than expected. Inflation Rate increased by 0.6% month-over-month while Core Inflation Rate grew by 0.2% month-over-month.

Gasoline prices recovered together with the price of oil and contributed to inflation. Meanwhile, oil continues to stay near the $40 level as the current bullish trend remains intact. This is a supportive catalyst for the Canadian currency but oil needs to go higher to provide material support to the Canadian dollar.

Tomorrow, the Bank of Canada will announce its Interest Rate Decision. The Interest Rate is expected to stay intact at 0.25% but the Bank’s comments may have material impact on USD/CAD trading.

Technical Analysis

Earlier, USD to CAD was gaining ground and tried to test the 50 EMA at 1.3655 level but lost momentum and declined closer to the 20 EMA level. At this point, the 50 EMA level remains a very serious obstacle on the way up for USD to CAD. I’d note that the previous upside move was stopped right at the 50 EMA.

In case USD to CAD manages to settle above the resistance at the 50 EMA, it will gain more upside momentum and head towards the next important resistance level at 1.3730.

On the support side, a move below the 20 EMA will once again put USD to CAD back into the trading range between the support at 1.3500 and the resistance at the 20 EMA. However, it is likely that USD to CAD bulls will provide serious support at the 20 EMA.