USD/CAD Daily Forecast – Oil Price Rebound Supports Canadian Dollar

USD/CAD Video 10.07.20.

Better-Than-Expected Employment Change Report Provides Additional Support To The Canadian Dollar

USD/CAD tried to settle above the resistance at the 20 EMA at 1.3590 but reversed course after the U.S. dollar started to show weakness against the broad basket of currencies while oil rebounded closer to the $40 level.

The U.S. Dollar Index did not manage to settle below the nearest resistance at 97 and declined to 96.5 after Gilead Sciences revealed positive results of late-stage study on remdesivir which is tested against coronavirus.

Meanwhile, oil failed to gain downside momentum and returned back to recent levels, providing support to commodity-related currencies like the Canadian dollar.

Canada has just reported employment data for June. Employment Change report showed that the economy added 952,900 jobs in June as businesses reopened and hired workers. Analysts expected that the economy will add 700,000 jobs.

Meanwhile, Unemployment Rate decreased from 13.7% in May to 12.3% in June compared to analyst consensus of 12%.

Interestingly, the Employment Change report was better than expected while Unemployment Rate missed analysts’ expectations.

This phenomenon is explained by the increase in Participation Rate which grew from 61.4% in May to 63.8% in June.

A combination of better-than-expected Employment Change report, rising oil prices and renewed optimism about the potential drug against coronavirus provided material support to the Canadian dollar and forced USD/CAD back into the previous trading range between the support at 1.3500 and the resistance at the 20 EMA at 1.3590.

Technical Analysis

As I mentioned above, USD to CAD is back to the 1.3500 – 1.3590 trading range. However, it maintains chances to settle above the 20 EMA and develop upside momentum.

In this case, USD to CAD will head towards the next resistance level at the 50 EMA at 1.3660. A successful test of this level will open the way to another major resistance level at 1.3730. The previous serious attempt to develop upside momentum was stopped at this level.

Nothing has changed on the support side for quite some time – the main support level is located at 1.3500, and a move below this level will likely lead to a sell-off which will quickly take USD to CAD to the next support level at 1.3440.

For a look at all of today’s economic events, check out our economic calendar.