Top Story

Extended crude oil plunge boosts USD/CAD despite US dollar weakness

Crude oil prices extended their recent plunge on Wednesday due in part to reports that Libyan oil fields had resumed previous levels of output after a recent disruption. Despite OPEC’s agreement last week to extend its existing deal limiting production among participating oil producers, crude oil has been pressured on concerns that the deal extension may not be enough to curb global output and keep prices stable if major non-participants in the deal, most notably the US, simply look to increase production.

The resumed drop in crude oil prices on Wednesday pulled down the energy-linked Canadian dollar, which boosted USD/CAD despite a significantly weakened US dollar. In addition, the oil-driven Canadian dollar fell against the greenback even after Canadian GDP data for March that was released on Wednesday came out better than expected at +0.5% against a +0.3% prior consensus forecast.

As the Canadian dollar fell against the US dollar, USD/CAD continued to stay aloft above the bottom of a key parallel uptrend channel extending back to the beginning of the year. Last week, the currency pair bounced off a confluence of support made up of this uptrend channel’s lower border and the important 1.3400 support level.

If OPEC and its non-OPEC partners in the deal do not plan on implementing further measures beyond the current output agreement, global production concerns could continue to weigh on crude prices and, in turn, the Canadian dollar. At the same time, the US dollar remains oversold on a short-term basis ahead of the key US jobs report that will be released on Friday.

Any near-term rebound for the US dollar or continued oil-driven pressure on the Canadian dollar should be seen on the USD/CAD chart as a continued move up from the noted trend channel’s lower border. As long as a breakdown below the channel does not occur, a USD/CAD move higher within the prevailing uptrend could next target the key 1.3600 intermediate resistance level to the upside.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.