USD/CAD Swoons as Crude Oil Price Surges

  


USD/CAD PRICE OUTLOOK: CANADIAN DOLLAR SPIKES HIGHER WITH CRUDE OIL ON PFIZER VACCINE NEWS

  • USD/CAD price action plummets to fresh yearly lows as the Canadian Dollar surges with oil
  • Crude oil prices explode higher in response to encouraging coronavirus vaccine headlines
  • The Canadian Dollar could continue climbing against safe-haven currencies like USD, JPY

The Canadian Dollar is soaring against anti-risk FX peers like the US Dollar and Japanese Yen. Likely owing to the latest coronavirus vaccine headlines, an eye-popping rally by crude oil prices stands out as a primary driver of Canadian Dollar strength. Pfizer released clinical trial data this morning stating that its COVID-19 vaccine is more than 90% effective, which seems to have re-charged the material improvement in market sentiment following the US election last week.

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CRUDE OIL PRICE CHART WITH USD/CAD OVERLAID: DAILY TIME FRAME (11 JUN TO 09 NOV 2020)

USDCAD Price Chart with Crude Oil Overlaid

Chart by @RichDvorakFX created using TradingView

Generally speaking, there is a strong positive relationship between the Canadian Dollar and crude oil price action. As such, spot USD/CAD tends to move lower as the Loonie strengthens on the back of higher crude oil prices. This inverse correlation between USD/CAD and crude oil is illustrated in the chart above. The Canadian Dollar thus shows potential to extend its advance, particularly against safe-haven currencies like the US Dollar and Japanese Yen, while expectations for economic growth and risk appetite improve in response to fading coronavirus concerns.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -29% 17% -12%
Weekly -32% 1% -19%

USD/CAD PRICE CHART: WEEKLY TIME FRAME (MAY 2017 TO NOVEMBER 2020)

USD CAD Price Chart Canadian Dollar Technical Forecast

USD/CAD price action now hovers at year-to-date lows following a 400-pip plunge over the last seven trading sessions. This came subsequent to the formation of a double-top pattern around the 1.3400-hande, which also aligned with a rejection of the 20-week simple moving average. Recent Canadian Dollar strength against the Greenback briefly pushed the major currency pair below the 1.2950-price mark, but spot USD/CAD bulls are currently attempting to defend 2019 lows.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 15% 13% 15%
Weekly 41% -27% 19%

Nevertheless, with expected market volatility imploding as measured by the S&P 500-derived VIX, or fear-gauge, coupled with crude oil prices spiking higher, there might be potential for USD/CAD to continue edging lower. This could bring the 76.4% Fibonacci retracement level of its September 2017 to March 2020 bullish leg into focus as an area of technical support that may alleviate selling pressure. On the other hand, if a return of risk aversion and reversal in crude oil prices materializes, this could fuel a rebound higher in USD/CAD price action.

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight





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