During Wednesday's early European trading session, the USD/CAD currency pair succeeded in extending its previous session gains and rose just above 1.3600 level, mainly due to the broad-based U.S. dollar strength backed by the downbeat trading sentiment. On the other hand, the reason for 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. At the moment, the USD/CAD currency pair is currently trading at 1.3602 and consolidating in the range between 1.3585 - 1.3624.
Investors were cautious about the growing number of new coronavirus cases globally and the probability of renewed lockdowns restrictions to control the spread, which eventually overshadowed the prospects for a sharp V-shaped global economic recovery. According to the latest report, the U.S. coronavirus cases increased to over 3 million in total so far, the largest outbreak in the world. In the meantime, the cases in Texas rose by more than 10,000 in just one day. Apart from the U.S., the increasing cases of coronavirus in Australia's most populous states urged Australia's Prime Minister to re-impose lockdown restrictions in Melbourne and Victoria. This statement additionally weighed on the risk sentiment.
However, the gloomy outlook was further bolstered by the ongoing geopolitical tensions between the U.S. and the rest of the global economies like the European Union (E.U.), the U.K., and China. It should be noted that U.S. Secretary of State Mike Pompeo recently fueled the ongoing tension between the US-China while imposed visa restrictions on some of the Chinese diplomats over Tibet issue, which also favored the risk-off mood.
As in result, the broad-based U.S. dollar edged higher in early European trade on the day as the safe-haven currency remained in demand mainly due to concerns about the mounting coronavirus cases. However, the gains in the U.S. dollar kept the currency pair higher. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies gained 0.06% to 96.895 by 12:09 AM ET (5:09 AM GMT).
At the crude oil front, the WTI crude oil prices registered 3-day losing streak and dropped towards 40 handles mainly after building in the US API crude stockpiles. The reason for the decline in crude oil could also be attributed to the risk-off market sentiment triggered by the relentless spread of the coronavirus, which continuously faded the optimism about the economic reopening and contributed to the oil losses. However, 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.
At the data front, the American Petroleum Institute (API) announced a two million-barrel build in crude oil supplies for the week ended July 3, much higher than the draw of 3.7m barrels in forecasts. For now, the traders will keep their eyes on the trade/virus updates due to the lack of major economic data today. Besides, the sentiment on the Asian indices and USD dynamics will be closely followed for the pair's next directions.
Daily Support and Resistance
Pivot Point 1.3587
On the technical side, the USD/CAD is facing double top resistance at 1.3619 level, and closing of Doji candles below this level is suggestings odds of selling bias in the pair. Today, the USD/CAD can trade bearish until 1.3520 level; however, the bullish breakout of 1.3619 level can extend the buying trend until 1.3670 level. The RSI and 50 EMA support buying; therefore, we should look for a bullish breakout above 1.3619 level to target 1.3670. Good luck!