U.S. Dollar Index Is Testing Multi-Month Lows
USD/CAD declined towards 1.3250 as the U.S. dollar continued to lose ground against a broad basket of currencies while WTI oil rallied to new highs.
The U.S. Dollar Index remains under significant pressure and is currently trying to settle below 92.5. If this attempt is successful, the U.S. dollar will likely gain additional downside momentum which would be bearish for USD/CAD.
Today, the U.S. ADP Employment Change report showed that private sector added just 167,000 jobs in June. This was a major disappointment since analysts expected a gain of 1.5 million jobs.
The previous ADP Employment Change report received a major revision from 2.4 million to 4.3 million which helped cushion the negative impact of July numbers.
U.S. Services PMI increased from 47.9 in June to 50 in July compared to analyst consensus of 49.6. Numbers above 50 show expansion.
There are no reports about progress in coronavirus aid talks between Republicans and Democrats which may be putting additional pressure on the American currency.
Meanwhile, WTI oil has managed to get above the resistance level at $42.50 and gained more upside momentum after the recent crude inventory report showed that crude inventories declined by 7.4 million barrels. Stronger oil supports commodity-related currencies like the Canadian dollar.
Technical Analysis
USD to CAD has managed to get below the support level at 1.3270 and continues its downside move.
The nearest support for USD to CAD is located at 1.3200. In case USD to CAD settles below this support level, it will head towards the next material support level at 1.3100.
RSI is not in the extremely oversold territory so there is plenty of room for USD to CAD to gain more downside momentum in case the right catalysts emerge.
On the upside, the nearest resistance level for USD to CAD is located at the previous support level at 1.3270. In case USD to CAD manages to settle above this level, it will head towards the next resistance level at 1.3330.
Currently, USD to CAD is in a downside trend which may get an additional boost in case the U.S. Dollar Index settles below 92.50.
-Reprinted from FX Empire. The copyright all reserved by the original author-
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