The USD/CAD pair closed at 1.33785, after placing a high of 1.34069 and a low of 1.33307. Overall, the movement of the USD/CAD pair remained bullish throughout the day. The USD/CAD pair recovered some of the previous day’s losses on Tuesday, after the US dollar improved a little, amid the hopes of economic recovery, after the US Stimulus package by the Republicans, came on board. The US dollar was also on the upside, ahead of the results of the Federal Reserve meeting, as this caused a surge in USD/CAD pair.

The US Dollar found support at 93.5, and attempted to gain more upside momentum above the 94 level. On Wednesday, the US Federal Reserve will announce its interest rate decision and provide a commentary that is expected to be dovish. This commentary will serve as a major catalyst for the American currency.

If the statement is dovish, then the US Dollar Index may breach the support level of 93.5, and head lower, ultimately dragging the USD/CAD pair with it. The rise in the price of the greenback could also be attributed to some correction, as the currency has been falling continuously for many days. Another factor driving the weakness of the US dollar over the past days, was the delayed US Stimulus package. But on Tuesday, the US Senate Republicans announced a new coronavirus package of $ 1 trillion, including an additional round of $ 1200 in direct payments to individuals, and a decrease in unemployment benefits from $ 600 to $ 200 per week. The package will also include more than $ 100 billion for the reopening of schools.

Though the package will need the approval of the Democrats, the US Congress will provide further stimulus, giving some support to the US dollar, adding to the gains of USD/CAD pair on Tuesday.

On the data front, the Richmond Manufacturing Index for July increased to 10 points from the expected 5 points, and 0 in June. The rise in the Richmond Manufacturing Index also supported the US dollar, helping it to improve, hence a rally in the USD/CAD pair.

The conference board measure of consumer confidence fell more than expected, to 92.6, from the previous 98.3, weighing on the US dollar.

On the other hand, the WTI crude oil prices dropped below $ 41 per barrel on Tuesday and weighed on the commodity-linked currency Loonie, ultimately pushing the USD/CAD pair higher.

On Tuesday, crude oil was lower, due to a risk-averse market sentiment, as the rise in the number of coronavirus cases worldwide raised concerns over the demand for another round of lockdowns. This would lead to a lessening demand for crude oil, like before. As a result, crude oil suffered, due to these concerns, dragging the Canadian dollar down with it, and this added gains in the USD/CAD pair.

Furthermore, the OPEC+ supply was on the rise, and the US production is also a tick higher, and this has decreased the demand for crude oil in the easing risk appetite environment. Besides the Federal Reserve Monetary Policy Statement, Canada’s Gross Domestic Product report for May will also be key to watch on Friday. It could boost the Loonie if there are signs that the economy is on the road to recovery.

Daily Technical Levels

Support Resistance

1.3336 1.3415

1.3293 1.3451

1.3257 1.3494

Pivot point: 1.3372

The USD/CAD is trading with a neutral bias at around the 1.3385 level, and overall it is trading within a bearish channel that provides resistance at the 1.3385 level. On the lower side, a bearish breakout at the 1.3362 level could extend sell-off until the next support level of 1.3318. Further selling bias could be seen below the 1.3318 level. Overall, the RSI and MACD are also in support of selling. Therefore, we should be looking for selling trades below the 1.3360 level, in order to capture a quick 50 pips. Good luck!