- USD/CAD rises above the 200-day EMA but struggles to crack 1.3400.
- Upside risks for the USD/CAD lie above 1.3400, which can trigger a rally toward 1.3500.
- USD/CAD failure to crack 1.3400 could pave the way for further losses.
The USD/CAD advances after bottoming last Friday at around 1.3300; the pair bounces off and hovers nearby the 1.3400 figure after reaching a high of 1.3420. At the time of writing, the USD/CAD is trading at 1.3395 and is gaining 0.31%.
The USD/CAD dove to new 8-week lows at 1.3300, spurring an increase in the greenback’s demand, even though the Bank of Canada (BoC), in its latest monetary policy, announced the BoC Governing Council discussed raising rates. Nevertheless, current expectations for additional Fed tightening bolstered the US Dollar.
USD/CAD Price Action
Given the backdrop, the USD/CAD is still neutral to downward biased, but it’s testing the upper boundaries of the 200-day Exponential Moving Average (EMA) at 1.3377. In addition, a daily close of the USD/CAD pair above the latter could exacerbate another leg-up in the pair, initially towards a downslope resistance trendline drawn from November 2022 highs that pass around the 1.3430-50 area. But firstly, the USD/CAD buyers need to reclaim 1.3400.
If USD/CAD cracks the 1.3400 figure, the next resistance would be the trendline mentioned above at 1.3430-50. Once cleared, the USD/CAD could threaten the confluence of the 20 and 100-day EMAs, around 1.3497-1.3504, before rallying towards the 50-day EMA At 1.3534.
Conversely, if USD/CAD stays below 1.3400, that could open the door for further downside. That said, the first support would be the 200-day EMA at 1.3377, followed by the April 17 low at 1.3342, before aiming toward the 1.3300 figure.
USD/CAD Daily Chart
USD/CAD Technical Levels
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The US Dollar to Canadian Dollar (USD/CAD) exchange rate is showing signs of recovery after a turbulent spell in the markets this week. The pair is now trading above the 200-DMA, giving rise to optimism that the pair could continue to strengthen in the near future.
The recent decline in USD/CAD was primarily due to tensions rising between the US and Canada over the border closure, as well as fears of a possible slowdown in the Canadian economy due to the impact of the coronavirus. The US Dollar was also affected by the Federal Reserve’s decision to keep interest rates steady, causing investors to sell the currency in anticipation of a weaker US currency.
However, recent developments have suggested that the pair is beginning to show signs of recovery. The Canadian Dollar has been bolstered by news of an increasing number of coronavirus vaccine trials in the country, with researchers suggesting that a vaccine for the virus could be ready for clinical use in early 2021. This has led to increased speculation that the Canadian economy could be heading for a faster recovery than previously expected, causing the loonie to appreciate.
Furthermore, the pair has been buoyed by the news that the US and Canada have now reached an agreement for the border to remain open until at least the end of January 2021. This news was met with a positive response from market participants, and has helped to increase confidence in the pair, leading to the recent price recovery.
The USD/CAD pair is now trading above the 200-DMA, indicating a further surge in the pair’s price. Analysts are now expecting the pair to move higher in the near term, with the next major resistance being seen around the 1.330 level.
Overall, the US Dollar to Canadian Dollar exchange rate appears to be showing signs of recovery and is trading above the 200-DMA. With continued optimism in the market, the pair could continue to strengthen in the near future.