USD/CAD continued to rise above its 1.4200 resistance target on Tuesday, hitting yet a new 12-year high, as the US dollar maintained its recent strength and the Canadian dollar was further weakened by plummeting crude oil prices.
The West Texas Intermediate (WTI) and Brent Crude oil benchmarks fell to new multi-year lows on Tuesday, both closely approaching the key $30 per barrel level, as pessimism over persistent global oversupply, potentially soft demand from an economically troubled China, and further strengthening of the US dollar, all weighed on oil prices.
In turn, the Canadian dollar, which is closely correlated with crude oil prices due to Canada’s heavy reliance on energy exports, continued to drop sharply, further propelling the USD/CAD exchange rate.
From a long-term perspective, the USD/CAD chart is very clearly trading within an exceptionally strong bullish trend due to a steadily rising US dollar and falling oil prices over the past couple of years. On a shorter-term view, the price trajectory since the beginning of the year last week shows a very steep and accelerated uptrend from the recent base around the 1.3800 support level.
Within the course of this latest surge for USD/CAD, the currency pair reached up to hit and exceed major upside targets at the 1.4000 psychological level and, most recently, the 1.4200 resistance objective. Currently, having broken out above this 1.4200 level, the strong bullish momentum is not showing signs of relenting.
If crude oil prices continue to fall or at least remain depressed as the US dollar maintains its resilience, USD/CAD could likely continue this upside momentum, extending its trend up towards the next major resistance target at 1.4600. On any pullback before that target level is potentially reached, major downside support remains around the key 1.4000 psychological support/resistance level.