USD/CAD Video 09.04.20.
Uncertainty Over OPEC+ Deal Prevents Canadian Dollar From More Upside
The U.S. dollar showed weakness after the U.S. Federal Reserve announced a $2.3 program to help local governments and small and mid-sized businesses. The Fed is injecting an unprecedented amount of liquidity into the U.S. financial system, and this could ultimately lead to longer-term negative consequences for the U.S. dollar.
The U.S. Initial Jobless Claims report showed that as much as 6.6 million of Americans filed for unemployment benefits. At this point, the markets were able to shrug off this negative data because of the Fed’s $2.3 billion aid program.
Meanwhile, Canada stated that it expected that its coronavirus deaths will ultimately total 22,000 while as much as 1 million jobs would be lost.
Today’s Canadian Unemployment Rate release showed that unemployment increased to 7.8% in March compared to 5.6% in February. The analyst consensus called for an unemployment rate of 7.2%.
The key near-term driver for USD/CAD is the outcome of OPEC+ meeting which is taking place today. Oil prices have already shown great volatility as traders speculated whether the deal will be reached or not.
However, oil still lacks direction after recent big moves. Stronger oil will support the Canadian dollar as oil production is a very important part of the Canadian economy. In the other scenario, lower oil prices will lead to upside in USD/CAD.
USD/CAD stays below the 20 EMA at 1.4070. The 20 EMA level serves as the first major resistance for the pair. This level has already been tested several times, and each time the pair met material selling activity.
If this level is breached to the upside, USD/CAD will likely move towards the next resistance area near the 1.4250 level. To breach this level, the pair will likely need additional fundamental catalysts, like a major rush to safe-heaven assets or major oil price weakness.
On the support side, the nearest support level is located near recent lows at 1.3925. USD/CAD tried to test this level several times but so far these attempts were not successful.
If this level is breached to the downside, USD/CAD may quickly find itself at the next support level near the 50 EMA at 1.3850.
This article was originally posted on FX Empire
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