USD/CAD Price Outlook: Canadian Dollar Climbs with Crude Oil
CANADIAN DOLLAR FORECAST: USD/CAD PRICE ACTION UNDER PRESSURE AS CRUDE OIL AIMS HIGHER DESPITE CORONAVIRUS SECOND WAVE RISK
- USD/CAD pivots lower after finding resistance around the 1.3600 price level
- Canadian Dollar gains ground as crude oil prices press higher amid pent-up demand
- Spot USD/CAD eyes Markit PMI data on deck and coronavirus second wave risk
The Canadian Dollar (CAD) is trading on its front foot against major FX peers like the US Dollar (USD) and Japanese Yen (JPY) so far for Monday’s session. In fact, spot USD/CAD price action has dropped by about 75-pips, or 0.5% since Friday’s close.
Canadian Dollar buying pressure seems to correspond with climbing crude oil prices. This likely follows draining storages amid pent-up demand as the global economy reopens from the recent coronavirus lockdown.
USD/CAD & CRUDE OIL PRICE CHART: 4-HOUR TIME FRAME (14 MAY TO 22 JUN 2020)
Typically speaking, there is a strong inverse correlation between the direction of crude oil and USD/CAD price action. That said, with crude oil prices trading back above $40.00 per barrel, there is potential for spot USD/CAD to target month-to-date lows. On the other hand, as crude oil hits resistance around its current level, Canadian Dollar bulls might lack motivation to make a sustained push in the absence of crude oil follow-through.
USD/CAD PRICE CHART: DAILY TIME FRAME (30 DEC 2019 TO 22 JUN 2020)
Nevertheless, a hard rejection of the long-term 200-day exponential moving average suggests that USD/CAD bears remain in control more broadly. Taking out last week’s low near the 1.3500-price level could open up the door to a sharper move lower – perhaps toward the 1.3400-handle and 76.4% Fibonacci retracement of the Loonie's year-to-date trading range.
Also noteworthy, upcoming IHS Markit Manufacturing PMI data on the US is due Tuesday, 23 June at 13:45 GMT. The latest PMI reports stand to reveal how quickly the global economy has recovered from the coronavirus lockdown that paralyzed business activity earlier this year.
Disappointing PMI data could prompt a return of demand for safe-haven currencies like the US Dollar. According to the DailyFX economic calendar, the June 2020 flash PMI for the US manufacturing sector is expected to cross the wires at 48.0 and will be compared to the prior reading of 39.8.
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