Canadian Dollar Falls With Crude Oil Prices, Will USD/CAD Break Higher Next?

USD/CAD, WTI, Global Growth – Canadian Dollar and Oil Briefing:

The Loonie is suffering along with crude oil prices

The Canadian dollar underperformed against the US dollar on Thursday, extending losses that began at the end of last week. USD/CAD is up nearly 1 percent this week so far, the best week for the currency pair since the beginning of March. What’s been driving Loonie’s losses lately?

Look no further than Crude Oil. WTI is down nearly 7 percent this week so far, marking the worst 5-day period since mid-March. The commodity has almost filled an upward gap since OPEC+ announced surprise cuts amid fading global growth prospects at the end of last month. This caused a rally in WTI as the markets started trading after the last weekend of March.

Oil is one of Canada’s main exports, which sometimes makes the economy sensitive to its price fluctuations. Recently, fears of slowing global growth have led to a decline in commodities. Yesterday, the Fed’s Beige Book showed that policymakers indicated a halt in economic activity in recent weeks. Meanwhile, there is a distinct discrepancy between how China’s economy is driven by domestic versus external factors.

Earlier this week, Chinese retail sales strongly beat expectations as the economy continues to recover from the zero Covid regime. But industrial production has declined, which is more sensitive to the health of the global economy. As such, it is not surprising to see USD/CAD rally in recent days, tracking the decline in oil prices. Where is USD/CAD from?

Technical analysis of the Canadian dollar

Focusing on the daily chart, the USD/CAD pair is now facing the 20-day simple moving average (SMA). The pair has not tested her since the end of March. This line can maintain a bearish focus in the near term, and return pivot prices to the ascending trend line from November and the support area 1.3263 – 1.3334. Otherwise, confirmation of the above breakout exposes the 1.37 inflection zone.

USD/CAD daily chart

Chart created in TradingView

– By Daniel Dubrovsky, Chief Strategist for DailyFX.com

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