Oil volatility drives the CAD

The rapid decline in oil prices at the beginning of the year dragged the Canadian dollar lower along with it.

Source: Bloomberg

This saw USD/CAD ascend rapidly in a move that took the pair to highs in the $1.2800 region. However the move has since stalled and the recent rebound in oil has helped sentiment. USD/CAD dropped to a low of $1.1920 last week, its lowest level since January 15. The pair is now at a very interesting point given there is an uptrend coming in from September last year. At the same time there is a short term downtrend from April highs that seems to be capping prices in the $1.2000 region.  If the pair can close above $1.2000, then we could see gains extend in the near term. The next resistance level is in the $1.2136 region which is the 23.6% retracement of the drop from March highs to last week’s lows. The key events for the pair will be the FOMC meeting minutes while on the CAD side we have retail sales and CPI. Inflation will be a big one given the impact oil prices have on price patterns.

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