USD/CAD Tests Double Top – Brace for Trade Breakout!

The USD/CAD closed at 1.36077, after placing a high of 1.36119 and a low of 1.35363. Overall, the movement of the USD/CAD pair remained bullish throughout the day. The USD/CAD pair dropped in early sessions on Monday, but found support and reversed its direction in the late session, to post gains. USD/CAD pair rose for the 3rd consecutive day on Monday on the WTI crude oil selloff.

The US dollar faced a sharp selloff, due to Wall Street’s main indexes opening sharply higher, which caused the US Dollar Index (DXY) to drop to a daily low of 96.27. On the coronavirus vaccine front, news from Russia, claiming that they have completed the human trials and obtained positive initial results, raised optimism around the market. This is the first vaccine to have undergone human trials, and it is thus celebrated as allegedly being the world’s first COVID-19 vaccine.

In the wake of risk-on market sentiment, the US dollar dropped in the early trading hours on Monday, dragging the USD/CAD with it. However, the pair rebounded in the late session, and turned its losses into gains on the back of the WTI crude oil selloff.

Crude oil was depressed, posting losses on Monday, as traders were awaiting the OPEC technical meeting this week, in which it is expected that an easing in the supply cut will be announced. The WTI crude oil price dropped below $40 per barrel, weighing on the commodity-linked Loonie, and ultimately, this helped the USD/CAD pair to gain traction on Monday.

On the data front, the Federal Budget Balance was released on Monday. It showed a deficit of 864.1 Billion in June, against the 860 billion deficit that had been forecast. This data supported the US dollar, adding further to the currency pair’s gains.

No macroeconomic data was released by Canada, and neither will there be any significant macroeconomic data releases from the Canadians on Tuesday. At the same time, the US economic docket will feature the inflation report. Markets expect the annual core Consumer Price Index (CPI) to rise from 0.1% in May, to 0.6% in June.

Daily Technical Levels
Support Resistance
1.3591 1.3605
1.3581 1.3609
1.3576 1.3619
Pivot Point: 1.3595

The USD/CAD pair is trading with a bullish bias, at the 1.3625 level, testing the double top resistance level of 1.3625. A bullish breakout on this level could extend the bullish bias until the next target area of 1.3695. On the lower side, the next support is likely to be found at around the 1.3570 level. Simultaneously, a bearish breakout on the 1.3575 level could lead the Canadian Dollar towards the 1.3490 level. I will be looking for a buy trade over the 1.3595 level today. Good luck! 

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