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  • USD/CAD rises above 1.25 as oil prices fall.
  • Greenback seeks refuge from the rising US yields.
  • Global economic recovery can lend support to the WTI and put pressure on the USD/CAD.

While no further buying was seen during the first half of the European session, USD/CAD analysis gained modestly above the key psychological 1.2500 level. Despite a variety of factors limiting any significant gains, the pair rallied for the third straight year on Tuesday, after bouncing off the 1.2425-20 support zone.

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On Monday, the ISM Manufacturing Purchasing Managers Index disappointed investors further, putting further pressure on the US dollar. Market participants seem to be convinced that the Fed will continue to support the dollar for longer. Risk impulses in the markets are also viewed as factors undermining safe-haven dollar strength.

Nevertheless, the strength of the US Treasury yield helped restrain more serious money losses. In the meantime, the commodity-pegged Canadian dollar continued to hold its own against the US dollar during the second quarter. US inventories are expected to decline steadily, despite concerns about the rapidly spreading Coronavirus delta variant that heavily weighed on black gold the previous day.

The high share of export earnings attributed to black gold explains the strength of USD/CAD despite broad US dollar weakness on Monday. In contrast, a daily loss of 0.02% was registered yesterday on the US Dollar Index (DXY), following Friday’s depreciation.

Besides the energy measures, the International Monetary Fund (IMF) recently announced a record rise in Special Drawing Rights (SDR), which gave WTI buyers hope during the gloomy Asian hours.

After hitting their lowest daily close since February, 10-year US Treasury yields are struggling to reach July 20 levels amid these events. Meanwhile, S&P 500 futures are showing modest gains.

No important economic data will be released from the US or Canada on Tuesday. Therefore, the general market sentiment and the yield on US bonds will influence the US dollar. Based on the dynamics of oil prices, traders can draw conclusions about upcoming opportunities around the USD/CAD pair.

USD/CAD technical outlook: Key MAs lending support

The USD/CAD pair is well bid above the key moving averages (20, 50 and 200) on the 4-hour chart. However, the 20-SMA lies between the 50-SMA and 200-SMA. It indicates that the strength of bulls has not been restored yet. The price is now wobbling around the lower end of an order block zone. The higher-end coincided with the 1.2600 psychological mark and 50% Fibonacci retracement level. On the flip side, 1.2500 is the key zone ahead of 1.2430 which is a swing low of July 30. The path of least resistance lies on the upside. However, there is no clue about buying from the volume indicator at the moment.

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USD/CAD 4-hour chart analysis
USD/CAD 4-hour chart analysis

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