USD/CAD resumes bearish stance as crude oil rebounds from Doha drop
James Chen, CMT April 18, 2016 12:20 PM
USD/CAD turned down sharply from the key 1.3000 psychological resistance level on Monday as crude oil prices rebounded and pared losses after having plunged on Sunday’s failed oil deal meeting in Doha, Qatar. Initially, crude oil prices had gapped down significantly after news of the failure to strike a deal among major OPEC and non-OPEC countries was made public. Monday, however, saw oil prices close the gap as the benchmarks, WTI and Brent, both recovered much of their losses.
Prior to and following the oil meeting, the Canadian dollar closely mirrored price action on crude oil, as is typically the case due to Canada’s traditional economic reliance on oil-related exports. In the immediate run-up to the Qatar meeting and on news of the meeting’s results, the Canadian dollar fell sharply, boosting the USD/CAD currency pair back up to the key 1.3000 psychological level. On Monday morning’s strong recovery in crude oil, however, the Canadian dollar closely followed suit, pressuring USD/CAD back down to its major 1.2800 support target.
Just last week, USD/CAD hit and dipped under that 1.2800 target, establishing a new 9-month low for the currency pair. That low was the latest culmination of a strong downtrend that has been in place since January’s long-term highs near 1.4700. This downtrend has largely resulted from the combination of a weakening US dollar and a strengthening Canadian dollar boosted by recovering crude oil prices within the past three months. During the course of the downtrend, USD/CAD has broken down below multiple key support factors, including the 1.4000 and noted 1.3000 psychological levels, as well as a major uptrend line that extends back to the lows of July 2014. Additionally, the 50-day moving average has crossed below the 200-day moving average in the past several weeks, forming a technical "death cross" and suggesting strong bearish momentum. With any sustained breakdown below the 1.2800 level, USD/CAD could next begin to target the 1.2500 support objective to the downside, which would confirm a continuation of the current three-month bearish trend.
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.