USD/CAD Set to Test Double Bottom – Is it a Good Time to Go Long?
Arslan Butt • 2 min read
The USD/CAD pair closed at 1.35933, after placing a high of 1.36312 and a low of 1.35750. Overall, the movement of USD/CAD remained bullish throughout the day. On Friday, the USD/CAD pair came close to the highest level in 8 days, after the release of Canada’s unemployment rate figures. However, the pair failed to settle above the resistance of 20 EMA, at a level of 1.3590, reversing its course on the downside. The USD/CAD pair was dragged down by the weakness of the US dollar and the rise in crude oil prices.
On Friday, the Canadian Dollar was higher because of the rising crude oil prices, amid the US dollar selling bias. The inverse relationship between crude oil and the US dollar raised crude oil prices, supporting the commodity-linked currency Loonie, and capping additional gains in the USD/CAD pair. The crude oil prices could be attributed to information released by Gilead Sciences, who reported positive results from the late-stage study on their antiviral drug Remdesivir, against the coronavirus.
At 17:30 GMT, the Canadian Employment Change for June showed a job creation level of 952K, against the expected 700.0K jobs, providing support for the CAD. The Unemployment Rate was 12.3%, against the expected 12.0%, weighing on the Canadian Dollar. The better-than-expected Canadian Employment Change and increased unemployment rate confused Loonie traders, and as a result, the USD/CAD pair remained in a confined narrow range on Friday.
The PPI came in at -0.2%, against the expected 0.4%, weighing on the US dollar from the US side. The Core PPI was reported as -0.3%, against the expected 0.1%, which further weakened the US dollar, limiting the gains for the USD/CAD pair.
The combination of a better-than-expected job creation report, rising oil prices, renewed optimism about a potential antiviral drug, and selling bias surrounding the US dollar dragged the USD/CAD pair from its daily high. However, the pair managed to close the day with a slight bullish candle.
Daily Technical Levels
Pivot point: 1.3595
The USD/CAD pair is trading with a bearish bias at the 1.3565 level, testing the double bottom support level of 1.3560. A bearish breakout at this level could extend selling until the next support area on the 1.3520 level. On the lower side, the next support is likely to be found at around the 1.3490 level. Simultaneously, a bullish breakout on the 1.3575 level could lead the Canadian Dollar towards the 1.3636 level. I will be looking for a buy trade over the 1.35600 level today. Good luck!