Canadian Dollar and Crude Oil Prices Setting Up for a Reversal?
Canadian Dollar, Crude Oil, Wuhan Virus, S&P 500 – Asia Pacific Market Open
- Canadian Dollar gains alongside sentiment-linked crude oil prices
- S&P 500 rallies as concerns around Wuhan virus subside for now
- USD/CAD may turn lower as oil rises, AUD/USD eyeing AU CPI
Canadian Dollar Rallies with Crude Oil Prices as Sentiment Recovers
The Canadian Dollar was the best-performing major currency on Tuesday as a turnaround in market mood fueled sentiment-linked crude oil prices. The S&P 500 experienced its best day since mid-October, rising about 1.01 percent after its worst session from roughly around the same time. US Treasury prices weakened on the front-end, underpinning the cautiously upbeat mood in financial markets.
Investors appear calmed by efforts to contain the Wuhan virus. The Chinese government has tightened regional travel restrictions and from a financial standpoint, pledged to provide ample amounts of liquidity. Other efforts include Starbucks, a popular U.S. coffee chain, shutting down about half of its locations in mainland China. Airports around the world have also implemented passenger screenings for symptoms.
Crude oil is a key source of revenue for Canada. An improving outlook to global growth as coronavirus fears ease could thus spillover into the economy, sending the Canadian Dollar higher. Local front-end government bond yields rallied. The cheery mood may have also been compounded by upbeat US consumer confidence data and rosy earnings from Apple.
Wednesday’s Asia Pacific Trading Session – Australian Dollar, Australian CPI Data
With that in mind, should Asia Pacific benchmark stock indexes follow Wall Street higher, the anti-risk Japanese Yen may extend its decline from Tuesday. That could also benefit the pro-risk Australian Dollar and New Zealand Dollar. AUD/USD is also awaiting Australian CPI data, but odds of an RBA rate cut for next week’s meeting have cooled to only about a 24.4% chance. An upside inflation report may further dim these expectations, pushing the Aussie to the upside in the near-term.
Join me at 00:15 GMT on Wednesday as I cover Australian CPI data and the impact on the AUD/USD and AUD/JPY outlook !
Canadian Dollar Technical Analysis
The USD/CAD has left behind a Dark Cloud Cover following Tuesday’s close. This is a bearish candlestick pattern that with confirmation, may precede a reversal of the near-term uptrend from the beginning of this month. That would place the focus on immediate support which is a range between 1.3111 – 1.3134.
USD/CAD Daily Chart
Crude Oil Technical Analysis
This is as WTI Crude Oil left behind a Bullish Engulfing candlestick pattern. With upside confirmation, this can translate into a reversal of the near-term downtrend from earlier this month. That would place the focus on immediate resistance at 55.35 which is the 23.6% Fibonacci retracement level.
WTI Crude Oil Daily Chart
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.