Today in the early European trading session, the USD/CAD currency pair succeeded to extend its previous session recovery moves and hit the session's high well above 1.3400 level mainly due to the broad-based U.S. dollar strength backed by the downbeat trading sentiment ahead of the release of U.S. Advance Q2 GDP report. On the other hand, the currency pair gains could also be attributed to the weaker oil prices, which eventually undermined the demand for the commodity-linked currency the loonie and contributed to the currency pair gains. Currently, the USD/CAD currency pair is currently trading at 1.3414 and consolidating in the range between 1.3332 - 1.3426. However, the traders seemed cautious to place any strong position ahead of the U.S. Advance Q2 GDP report.
However, the worries over the second wave of the Covid-19 virus and uncertainty surrounding the U.S. fiscal package, triggered by the differences between U.S. Senate members, exerted bearish pressure on the risk sentiment. As per the latest report, the number of coronavirus infections has risen more than 17 million worldwide, with 4.4 million cases and more than 150,000 deaths in the U.S. individually, as per Johns Hopkins University data. In the meantime, China, South Korea, and Japan have also recorded a sharp rise in confirmed cases. It is worth reporting that Japanese media reported that 365 new infections were recorded in Tokyo on Thursday. However, these concerns keep the investors on the slippery road and exerted downside pressure on the market trading sentiment.
Besides the Virus woes, the conflict between the U.S. and China over Hong Kong security law remained on the card. As per the latest warning by China Commerce Ministry Spokesman Gao Feng against the challenges faced by the Dragon Nation regarding trade due to the rising external uncertainties.
As in result, the broad-based U.S. dollar has started to flash green and took bids as investors turned the safe-haven asset mainly due to concerns over the US-China war and virus woes. However, the gains in the U.S. dollar could be short-lived or temporary due to the worries that the economic recovery in the U.S. could be stopped in the wake of the resurgence in coronavirus cases. Hence, the gains in the U.S. dollar kept the currency pair higher.
At the crude oil front, the WTI crude oil prices remained under selling pressure even after the upbeat stockpiles report. However, the decline in crude oil could also be attributed to the concerns about worsened US-China relations and the intensifying resurgence of virus cases, which fueled the demand concerns. Thus, the pullback in oil prices undermined demand for the commodity-linked currency – the loonie and remained supportive of the USD/CAD pair's ongoing recovery momentum.
The traders are keenly awaiting the U.S. economic docket, which will show the Advance Q2 GDP report, which is expected to collapse by a record 34.1% during the second quarter of 2020. However, this data will leave a significant impact on the U.S. dollar and produce some important trading opportunities on the day ahead.
Daily Support and Resistance
Pivot Point 1.3378
The USD/CAD has recovered from losses to a complete 38.2% Fibonacci retracement level of 1.3446. It recently has crossed over the 50 periods EMA, suggesting odds of further bullish bias in the pair. The RSI is holding in a bullish zone, supporting the buying trend, but the 38.2% Fibonacci retracement level of 1.3440 level is keeping it under pressure. For now, the bullish breakout of 1.3440 level can extend buying until 1.3472 level, and above this, the next target can be 1.3505. Good luck!