- USD/CAD supported over 50 EMA at $1.2655 ahead of the Federal Budget Balance from the US Department of the Treasury.
- USD/CAD price prediction stays bullish above an immediate support level of $1.2656.
- Forex trading participants will be looking for a sell trade below the $1.2701 level to reach the target of $1.2657 and $1.2625
The USD/CAD currency pair extended its early-day declining streak and remained defensive heading into the European session. The pair was last seen trading with modest losses around the 1.2665 regions. However, the declines in the currency pair were mainly sponsored by the higher crude oil prices. The USD/CAD has supported over 50 EMA at $1.2655 ahead of the Federal Budget Balance from the US Department of the Treasury.
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A surge in oil underpins the Canadian Dollar.
Lately, WTI crude oil prices rose for a second session on Monday as concerns over shutting output in the United States supported the oil market. It ultimately underpinned the commodity-linked loonie and contributed to the USD/CAD currency pair’s losses.
On the other hand, the board-based US dollar strength, backed by multiple factors, extended some support to the USD/CAD pair and helped limit any meaningful decline, at least for now. The USD/CAD currency pair is trading at 1.2688 and consolidating in the range between 1.2661 and 1.2695.
Crude oil prices managed to extend the previous session’s goodish move up from the $67.50 area on the oil front. It gained some further traction on the day amid expectations for higher demand. Meanwhile, the concerns over shutting down output in the US gave additional support to the oil market and contributed to the oil gains. However, the concerns over the slow restoration of supplies in the Gulf of Mexico appeared after the disruption caused by Hurricane Ida.
Covid-19 Fears in Play
The ever-increasing coronavirus woes and a lack of major data events put some pressure on oil prices. Australia’s daily covid counts rise from 1,672 to 1,750. Moreover, authorities in Shanghai shut down schools and suspended flights on geopolitical fears. Thus, the worry about the fast-spreading Delta variant could cap gains in oil prices.
Bullish Bias in US Dollar Drags USD/CAD Higher
On the other hand, the broad-based US dollar maintained its early-day bullish streak and remained a strong bid on the day. However, the US dollar was being supported by the Fed’s expectations to begin rolling back its massive pandemic-era stimulus sooner rather than later.
The hopes were fueled by Friday’s release of the US Producer Price Index, which registered the biggest gain since November 2010. It indicated that higher inflation could persist for some time. So, the broad-based US dollar strength extended some support to the USD/CAD currency pair. Thus, it helped limit any meaningful decline, at least for now.
The US Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.10% to 92.668 by 10:43 PM ET (2:43 AM GMT).
What’s Next?
Looking forward, market traders will keep their eyes on the US data, which can give further clues about the US Federal Reserve’s timetable for beginning asset tapering. Investors keep their eyes on the US consumer price index data due on Tuesday after Friday’s data showed that August’s producer price index (PPI) increased 0.7% month-on-month and 8.3% year-on-year. The core PPI rose 0.6% and 6.7% month-on-month and year-on-year, respectively.
USD/CAD Price Forecast – Technical Levels
Support Resistance
S3 1.2426
S2 1.2541
S1 1.2615
Pivot Point 1.2656
R1 1.273
R2 1.2771
R3 1.2886
USD/CAD Supported Over 50 EMA at 1.2655 – US Department of the Treasury Ahead
The USD/CAD price prediction stays bullish above an immediate support level of $1.2656. Currently, the USD/CAD is trading at the 1.2679 level, facing immediate resistance at the 1.2701 level. In the 4-hour timeframe, the currency pair is staying below the downward trend line, which is providing it with major resistance at the 1.2699 level.
The bullish breakout of the 1.2701 level can extend a buying trend in the currency pair until 1.2763. The pair is likely to face another resistance on the way to 1.2760 at the 1.2725 level.
On the 4 hours timeframe, the 50 periods exponential moving average provides immediate support at the 1.2655 level. The closing of candles above this level suggests a substantial bias for buying trends in the currency pair. However, the bearish crossover below 50 days’ exponential moving average can extend the selling trend until the next support level of 1.2628. Lastly, the leading technical tool, Stochastic RSI, holds in a sell zone below 20, confirming a bearish bias among investors. Therefore, the forex trading participants will be looking for a sell trade below the $1.2701 level to reach the target of $1.2657 and $1.2625. All the best.
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