US Dollar Outlook: USD/CAD Mired By Jobs Data Due, Oil Prices

The US Dollar extended another -0.4% lower on Thursday gauging by the DXY Index. This caused the US Dollar benchmark to notch a close below its 20-day simple moving average for the first time since 25 February. US Dollar weakness over the last few trading sessions has been far-felt across the board of major currency pairs, though the rally staged by EUR/USD price action has been particularly impressive.

DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (04 DEC 2020 TO 08 APR 2021)

DXY Index Price Chart US Dollar Technical Forecast

Chart by @RichDvorakFX created using TradingView

Recent EUR/USD buying pressure has largely helped US Dollar bears claw back about one-third of the 3.7% gain recorded by the DXY Index during 1Q-2021. This is seeing that EUR/USD is the largest component of DXY Index performance with a 57.6% weight. That said, declining Treasury yields could be a primary driver weighing negatively on the broader US Dollar. Fed speeches continue to express how FOMC officials remain resolute in their pursuit to keep monetary policy accommodative as well. US Dollar bears thus might try to extend the pullback with sights set on the 38.2% Fibonacci retracement and 50-day simple moving average.

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

USD Price Chart Outlook US Dollar Implied Volatility Trading Ranges EURUSD USDCAD

Shifting focus to Friday’s trading session, we see that currency volatility is expected to cool off further judging by the latest US Dollar overnight implied volatility readings. USD/CAD price action could be worth keeping an eye on, however, in light of high-impact event risk posed by the upcoming release of Canadian jobs data due 09 April at 13:30 GMT. It is worth mentioning how swings across crude oil prices might contribute to USD/CAD volatility – particularly in light of rising covid cases and mounting tension at the Ukraine-Russia border.

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