⚡Crypto Alert : Altcoins are up 28% in just last month! Unlock gains and start trading now - Click Here

USD/CAD Enters Oversold Zone – Traders Brace to Capture Buying! 

Posted Wednesday, July 22, 2020 by
Arslan Butt • 2 min read

The USD/CAD pair closed at 1.34589, after placing a high of 1.35367 and a low of 1.34282. Overall, the movement of the USD/CAD pair remained bearish throughout the day. On Tuesday, the USD/CAD pair posted losses for the 3rd consecutive day, reaching the lowest level since June 11, on the back of the weak US dollar and increased WTI crude oil prices.

 

On the data front, the Core Retail Sales data from Canada was released at 17:30 GMT. It indicated that in May, Canada’s core retail sales dropped to 10.6%, against the expected 11.9%, weighing on the Canadian dollar. The Retail Sales in Canada also declined to 18.7%, against the predicted 20.2%. The New Housing Price Index (NHPI) for June dropped too, by 0.1%, from the expected 0.2%, weighing on the Canadian dollar.

 

The USD/CAD pair continued moving in a downside direction, despite the poorer-than-expected Canadian macroeconomic data. The retail sales in Canada dropped, indicating a gloomy outlook for the Canadian economy. However, investors ignored this data, as the focus was more on the weakness of the broad-based US dollar and rising crude oil prices.

 

The crude oil prices rose above $ 42 per barrel, after the risk sentiment picked up pace in the market, based on optimism on the coronavirus vaccine front and hopes of an economic recovery. The trials conducted in the UK and China, on potential vaccines for the coronavirus, provided positive initial results, raising hopes that vaccines will be developed soon, and this increased optimism for economic recovery.

 

The risk sentiment was further supported by the EU stimulus plan, upon which consensus was reached between 27 member countries. Though some changes were made to the plan, they finally came to an agreement, and the fund is now set to help the EU economy in its recovery process. The distribution of the EUR 750 Billion stimulus package was originally set at 500 Billion in grants and 250 Billion in loans, but the grants have now been reduced to 390 Billion, and the loans have been upped to 360 Billion. The risk sentiment was also supported by the reduction in the latest number of coronavirus cases in Texas and LA.

 

The rising hopes about the economic recovery from the stimulus package and development of a COVID19 vaccine also raised the bar for the risk sentiment, weighing on the US dollar. As crude oil and the US dollar are inversely correlated, crude oil rose above $ 42 per barrel on Tuesday. The rising crude oil prices gave strength to the commodity-linked Loonie and weighed on the USD/CAD pair.

 

The USD/CAD pair was further dragged down by the increasing number of coronavirus cases worldwide, especially in the US. The US Dollar Index was down to the 95.35 level, and US treasury yields were also low. The broad-based selling bias in the US dollar pulled the USD/CAD pair below the 1.345 level.

Daily Technical Levels

Support Resistance

1.3407 1.3524

1.3357 1.3589

1.3291 1.3640

Pivot point: 1.3473

 

The USD/CAD is taking a bullish turn, after placing a low at the 1.3432 level. The recent closing of Doji and bullish engulfing candles supports the odds of a bullish correction in the USD/CAD pair. On the higher side, the pair could find resistance at the 1.3532 level, extended by the 50 EMA resistance. Simultaneously, there is a downward trendline in the USD/CAD pair, that could provide resistance at the 1.3530 level. Let’s look for buying positions over the 1.3432 level today. Good luck! 

 

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Related Articles
Comments
0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments