USD/CAD Gains Fresh Bids – Trade Setup Ready to Form!
Arslan Butt • 2 min read
Today, in the European trading session, the USD/CAD currency pair succeeded in extending its gains of the previous session, hitting the weekly high, close to the 1.3100 level, mainly due to the strength of the broad-based US dollar, backed by the US better-than-expected manufacturing data released on Tuesday. The US Employment data, which was once again disappointing, failed to stop the ongoing USD recovery move, lending further support to the currency pair.
On the other hand, the reason for the gains in the currency pair could also be attributed to the weaker oil prices, which eventually weakened the demand for the commodity-linked currency, the Loonie, and extended some further support to the currency pair. Currently, the USD/CAD currency pair is trading at 1.3076, and consolidating in the range between 1.3038 and 1.3099.
The recovery moves of the US dollar are linked to upbeat US macro data, which showed that activity in the manufacturing sector almost reached a two-year high in August, due to the surge in new orders. In turn, this helped buyers of the greenback to largely ignore Wednesday’s weaker-than-expected ADP report. In the meantime, an uptick in the US Treasury Bond Yields extended some further support to the US dollar.
On the data front, employment in the US private sector rose by 428,000 in August, according to monthly data published by the Automatic Data Processing (ADP) Research Institute on Wednesday. It should be noted that this reading followed July’s increase of 212,000 (revised from 167,000), missing the market expectations of 950,000 by a wide margin.
Despite this, the broad-based US dollar was flashing green, and taking bids on the day. However, the modest gains in the US dollar kept the currency pair higher. Meanwhile, the US Dollar Index, which measures the greenback against a basket of 6 major currencies, rose by 0.03%, to 92.977.
On the crude oil front, the WTI Crude Oil prices reported losses on the day. However, the reason for the decline in crude oil could be attributed to the worries regarding the falling demand in the US and sluggish economic recovery from the coronavirus. The rumors concerning Iraq’s push for exemption from OPEC+ output cuts also weighed on the oil prices. Thus, the declines in the oil prices undermined demand for the commodity-linked currency, the Loonie, contributing to gains in the currency pair.
Looking ahead, the market traders will keep their eyes on the final German and Eurozone PMI readings, which are scheduled for release on the day. Friday’s Nonfarm Payrolls (NFP) will also be key to watch. In the meantime, the updates surrounding the fresh Sino-US tussle, this time over the South China Sea, and the coronavirus (COVID-19) updates, have not lost significance.
Daily Support and Resistance
Pivot Point 1.306
The USD/CAD is trading with a bullish bias at 1.3095, with an immediate resistance at 1.3110. A bullish breakout of 1.3110 resistance could trigger buying until 1.3113 and 1.3145. On the other hand, the pair could find support at the 1.3030 and 1.2995 levels. The MACD and RSI are supporting a bullish bias in the USD/CAD. Good luck!