USD/CAD managed to settle below the support at 1.3050 and tested the next support at 1.3000 as the U.S. dollar remained under pressure against a broad basket of currencies.
The U.S. Dollar Index made an attempt to settle below the 92 level but found some support at 91.75 and rebounded. However, the American currency is still under significant pressure which is bearish for USD/CAD.
Oil is serving as a positive catalyst for the Canadian dollar as it gains ground after the release of strong China’s Manufacturing PMI data.
Today, traders also had a chance to evaluate Manufacturing PMI reports for U.S. and Canada.
U.S. Manufacturing PMI increased from 50.9 in July to 53.1 in August while Canada’s Manufacturing PMI grew from 52.9 to 55.1.
Manufacturing PMI reports from around the world indicated that developed economies continued to rebound after the acute phase of the crisis. From a big picture point of view, this rebound in the economic activity is bullish for riskier assets and bearish for safe-haven assets like the U.S. dollar.
Technical Analysis
USD to CAD breached the support level at 1.3050 and tested the next support at 1.3000 but rebounded and returned closer to the previous support at 1.3050.
RSI has entered into the oversold territory but has not reached the extremely oversold territory, suggesting that there is more room to develop downside momentum in case the right catalysts emerge.
In case USD to CAD manages to settle below the nearest support level at 1.3000, it will gain additional downside momentum and head towards the test of the next support level at 1.2960.
On the upside, the previous support level at 1.3050 will likely serve as the first important resistance level for USD to CAD. A move above this level will open the way to the test of the next resistance level at 1.3135.
If USD to CAD settles above the resistance at 1.3135, it will head towards the 20 EMA at 1.3180.
At this point, USD to CAD remains in a strong downside trend, and it will need significant catalysts to change this trend.
Reprinted from Fxempire，the copyright all reserved by the original author.
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