The USDCAD pair has hit a critical resistance level around 1.3300 and is struggling to find positive momentum as oil prices staged an intraday rebound on Tuesday. Profit-taking from oil sellers after a resounding one-week fall in prices due to coronavirus-induced demand fears has helped the Canadian Dollar to recover a little bit of the ground it has lost in the last week.
The correlation of crude oil price and the USDCAD have been reinforced in the past two weeks, as global markets struggle to deal with the impact of the coronavirus. With little impact from the upbeat US ISM Manufacturing PMI data, the USDCAD has now approached the key resistance zone that was identified in some of my previous analyses of this pair.
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Technical Outlook for USDCAD
With no significant news for the pair coming up until Friday’s employment reports from both the US and Canada, the price action will be dominated by happenings with the crude oil price and on coronavirus-related events.
The USDCAD has been rejected at the 1.3300 mark, which acts as a psychological resistance. It is also the lower border of the resistance zone that is defined by the two descending trendlines displayed on the daily chart.
If the rejection move is sustained, this will allow USDCAD the opportunity to test the initial downside targets at 1.32254 as well as 1.32030. Further strengthening will depend on a rise in crude oil prices.
On the flip side, worsening risk-off sentiment induced by increased coronavirus fears as well as a further drop in oil prices will bring the USDCAD back into contention with the resistance zone. Further upside for the USDCAD beyond 1.33487 will depend on a complete breakout from this zone. This move would have the opportunity to target 1.34328 and potentially, 1.35231.
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