USD/CAD extends gains to retest 1.3600 resistance area

• The US dollar bounces up from 1.3520 to retest resistance in the area of 13600
• The dollar pares losses amid a moderate risk aversion on concerns of a second coronavirus wave
• USD/CAD: break of 1.3485 will drive the pair towards 1.3331 – Credit Suisse

The US dollar has firmed up against its Canadian counterpart to pare losses after a weak performance during the Asian trading session. The pair bounced at session lows at 1.3520 to return to the 1.3595/00 resistance area, which, so far, remains unbroken.

The dollar advances on a moderate risk aversion

Ongoing concerns about a second wave of COVID-19 infections and its potential damage to the economic recovery are pushing safe-haven currencies higher. The increase of infections reported in different US states and Beijing’s measures to curb travel to control a new outbreak are dampening investor’s hopes of a quick recovery from the shutdown.

On the macroeconomic front, US indicators have been mixed on Thursday, having a muted impact on the FX. The weekly jobless claims posted a 1.5 million increase in the week of June 12, while, on the positive side, the Philadelphia Manufacturing Index improved to a level of 27.5 in June from -43 in May, beating expectations of a -23 reading.

Lastly, the positive tone observed on oil prices, with the WTI futures appreciating nearly 2% on the day has given some support to the commodity-linked CAD.

USD/CAD: Potential slump towards 1.3331 on a break of 1.3482 – Credit Suisse

On a longer-term, the FX Analysis Team at Credit Suisse observes a bearish potential in the par that might unfold below 1.3482, “USD/CAD is slowly grinding lower, in line with the large bearish ‘descending triangle’ continuation pattern that is still in place. We expect this path to continue and see scope for further weakness, with support initially at 1.3505, then 1.3482/75. Removal of here would see the small base negated and a fresh attempt at 1.3398, then 1.3365/57, ahead of the ‘neckline’ to the November/December 2019 base and 78.6% retracement of the 2020 surge at 1.3331/16, which may continue to prove a tough barrier.”