USD/CAD Holds Below 50 EMA – Quick Trade Plan to Follow! 

Posted Monday, August 24, 2020 by
Arslan Butt • 2 min read

The USD/CAD closed at 1.31713, after placing a high of 1.32338 and a low of 1.31587. Overall, the movement of the USD/CAD pair remained bearish throughout the day. The USD/CAD pair advanced to a fresh daily high at 1.3234 on Friday, but it lost its traction amid profit-taking, ahead of the weekend. The pair extended the previous day’s losses, ending the day in negative territory, after failing to recover.

 

At 17:30 GMT, the Core Retail Sales for June were released. They exceeded the expectations of 14.5%, coming in at 15.7%, to support the Canadian Dollar. In June, the Retail Sales from Canada declined to 23.7%, compared to the anticipated 24.7%, and weighed on the Canadian Dollar. The New Housing Price Index in July rose to 0.4%, exceeding the expected 0.1%, and giving the Canadian Dollar a boost.

 

The better-than-expected Core Retail Sales and NHPI data from Canada increased the strength of the Canadian Dollar and added to the losses in the USD/CAD pair on Friday. Meanwhile, at 18:45 GMT, figures released showed that the Flash Manufacturing PMI rose to 53.6, compared to the anticipated 51.9, lending support to the US dollar. The Flash Services PMI also rose to 54.8, in contrast to the expected 50.9, boosting the US dollar.

 

The better-than-expected data from the US and the rise of the US Dollar Index (DXY) to the 93.5 level also failed to stop the losses in the USD/CAD pair on Friday, as investors were only focused on profit-taking. The Crude Oil prices fell by 2.8%, to below the $ 42 level, at $ 41.4 on Friday, weighing heavily on the commodity-linked Loonie. But, the CAD failed to gather strength, as the declining crude oil prices put additional weight on the Loonie.

Investors ignored the declining crude oil prices and kept selling the USD/CAD pair on Friday, amid correction and profit-taking. However, the pair attempted to recover its daily losses, rising to the 1.32338 level, on the back of declining crude oil prices.

 

The oil sensitive Loonie remained flat against the US dollar, as oil prices held steady most of the time on Friday. Oil prices were supported by major oil producers being forced to hold back on output, due to worries about the pace of the economic recovery from the coronavirus crisis.

Meanwhile, the risk sentiment was also under pressure, as the ongoing geopolitical tensions kept weighing on it. The rising US-China and US-Iran tensions also weighed on the USD/CAD pair on Friday.

Daily Technical Levels

Support Resistance

1.3170 1.3188

1.3162 1.3196

1.3153 1.3205

Pivot point: 1.3179

 

The USD/CAD is trading at the 1.3163 level, having violated the support level of 1.3175, which is now working as a resistance. On the lower side, the pair is likely to find support at the 1.3138 level. The USD/CAD could drop further, until the next support area of 1.3106. The MACD and RSI are also in support of selling, while the 50 periods EMA also suggests a selling trend in the USD/CAD pair. Let’s consider selling below the 1.3178 level today. Good luck! 

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