The US Dollar has not been happy about the number of coronavirus cases in the US. The US Dollar Index fell half a percent last week and has closed lower the last 3 weeks. As states such as California, Arizona, Texas, and Florida continue to report record daily new cases, the US Dollar has been taking a hit. However, as the stock market continues to price in “the worst is behind us” in the US, stocks continue to move higher, which is helping to push the US Dollar lower. It is the beginning of Q2 and that means its bank earnings time! US banks to report this week include JPM, C, WFC, GS, and BAC. In addition, IBM and and NFLX also reported. The US Dollar could be volatile this week.
Last week, Canada released its employment change for the month of June. The number was better than expected at +952,900 vs an expectation of +700,000 and +289,600 in May. Manufacturing has picked up recently as well. This week brings the Bank of Canada (BOC) Interest Rate Decision. As with most central banks as of late, expectations are for unchanged at 0.25%. New BOC Governor Macklem will mostly likely not be looking to rock the boat. The BOC should maintain its current funding programs and look to take further action as needed to help support the Canadian economy. If the BOC surprises and is less dovish than expected, the Canadian Dollar could strengthen. WTI crude has been relatively stable over the past month and therefore, has not had much effect on the movement of the Canadian Dollar.
Technically, USD/CAD has been trading in a downward sloping channel since the pair peaked back on March 19th and closed near the top of the channel on Friday at 1.3590. The top of the channel is currently at 1.3630 and acts as first resistance. The 200 Day Moving Average comes in at last week’s lows near 1.3503, which acts as first support. Any break above or below either of these levels could usher in a wave of activity and push the pair further in the breakout direction.
On a shorter 240-minute timeframe, USD/CAD has been trading in sideways channel since early June between 1.3480 and 1.3720. Most recently, the pair has been trending lower in a triangle formation. A break above the previously mentioned 1.3630 could bring in buyers, as the next horizontal resistance level isn’t until 1.3716. The next level of horizontal resistance is 1.3850 (see daily). After the 200 Day Moving Average, the next level of support is the bottom of the channel/triangle near 1.3483. The next level of support is the June 10th lows near 1.3315 (see daily).
This could be the week that USD/CAD finally breaks out of its trading range. With the US Dollar hinging on coronavirus cases and bank earnings this week, along with the BOC interest rate decision, the pair could see some much-needed volatility for traders!