USD/CAD Bounces off Support – Quick Trade Plan!

Posted Friday, July 24, 2020 by
Arslan Butt • 2 min read

The USD/CAD pair closed at 1.34060, after a high of 1.34272 and a low of 1.33509. Overall, the movement of the USD/CAD pair remained bearish throughout the day, extending its declines and maintaining its bearish streak for the 4th consecutive session on Thursday, and reaching the lowest level since June 10, at below the 1.3350 level. The USD/CAD currency pair’s downtick was sponsored by a combination of factors, including the selling bias surrounding the US dollar and the previous day’s CPI data from Canada.


Despite the fall in the WTI Crude Oil prices on Thursday, the USD/CAD pair moved in the downward direction, mainly due to the weakness of the broad-based US dollar. The crude oil prices dropped in the wake of Wednesday’s rise in the crude oil inventories. The data suggested that crude oil inventories in the US rose by 4.9 M, against the expectations of -2.1 M, weighing on the demand for crude oil. The change in demand also affected the prices of crude oil and weighed on the commodity-linked Loonie. 


However, the Loonie traders ignored the decreasing crude oil prices and focused more on the upbeat CPI data from Canada, which was released a day earlier. The data showed that the domestic annual inflation in June had posted its biggest acceleration in more than nine years. This underpinned the outlook of the Canadian economy, pushing the Canadian dollar up. The strong Canadian dollar pulled the USD/CAD pair onto the down track.


On the other hand, the second wave of the coronavirus outbreak in the US raised fears that the economic recovery could be delayed, and as a result, US dollar bulls remained on the defensive side. Their fears were accelerated by the differences between the Republicans and Democrats, over the $ 3 trillion stimulus package. Both fears led the US dollar onto the downside track and added to the losses of the USD/CAD.


Furthermore, the downfall could also be attributed to some follow-through technical selling, below the 1.3400 level support. Besides this, the poorer-than-expected jobless claims from the United States for the previous week also supported the downward movement of the USD/CAD currency pair on Thursday. The US unemployment claims exceeded the expectations of 1.3 M, pushing up to 1.4 M last week, in the wake of surging coronavirus cases across the country.

Daily Technical Levels

Support Resistance

1.3364 1.3443


1.3284 1.3522

Pivot Point: 1.3396


Technically, the USD/CAD has bounced off the support level of 1.3365. Closing of candles above this level could extend buying until the 1.3486 level, which will now work as a resistance. Overall, the trading bias is bearish, as the pair is holding below 50 periods EMA, and the  MACD also suggests a selling bias. Let’s consider selling below the 1.3486 level today. Good luck!  


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