The USD/CAD pair extended its upward momentum to its highest level since 12th August, however, in the late trading session, the pair reversed its direction and closed its day with losses. The pair’s upward trend could be attributed to the strong rebound of the US dollar across the board due to more hawkish comments from the Federal Reserve officials and US Secretary Steven Mnuchin. In their testimony to Congress, the Federal Reserve Chairman Jerome Powell and US Treasury Secretary Steven Mnuchin gave their views about the economic condition and strategies.
Powell reiterated that the economic indicators were showing improvement in the market but still, there was a lot dependent on the coronavirus pandemic. He also said that country had left behind the depressed days where economic activities were shut down due to the coronavirus pandemic, but there is still much left to be done.
Whereas, Mnuchin stressed the need for the next round of stimulus measures and urged Congress to announce it soon. Another Fed official Charles Evans said that Fed’s interest rates could be raised before the 2% inflation target is met, and this raised the bars for the US dollar across the board. The US Dollar Index rose above 94 levels and pushed the USD/CAD pair above 1.334 level on Tuesday, highest since mid-August.
However, the USD/CAD pair’s gains could not live for long and started to decline in the second half of the day despite the declining crude oil prices. The Canadian Dollar came under pressure when the crude oil prices dropped to $39 level on Tuesday amid the rising tensions between the US & China and coronavirus’s global resurgence.
The fears that rising coronavirus cases worldwide could force renewed lockdown measures globally as the European countries were re-imposing restrictive measures to curb the spread of coronavirus weighed on Crude oil prices on Tuesday. Meanwhile, the rising tensions between the US & China over the South China Sea after the US called for help from Europe and other allies against China’s claim to lands in the South China Sea, also exerted pressure on Crude oil prices. The declining crude oil prices weighed on the Canadian Dollar, and the USD/CAD prices reached its highest since 12th August.
Technically, the USD/CAD pair has violated the strong resistance level of 1.3345, and on the higher side, the target for USD/CAD is likely to stay at 1.3394. The 50 EMA and the MACD are supporting the upward movement in the market; therefore, we have opened a buy trade in the USD/CAD pair. Let’s follow the below trade plan…
Entry Price – Buy 1.33457
Stop Loss – 1.33057
Take Profit – 1.33857
Risk to Reward – 1:1
Profit & Loss Per Standard Lot = -$400/ +$400
Profit & Loss Per Micro Lot = -$40/ +$40
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