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USD/CAD Price Outlook: Canadian Dollar Climbs with Crude Oil

USD/CAD Price Outlook: Canadian Dollar Climbs with Crude Oil

Rich Dvorak, Analyst

CANADIAN DOLLAR PRICE OUTLOOK: USD/CAD DROPS TOWARD KEY 1.30-LEVEL AS CRUDE OIL SURGES

  • USD/CAD price action plunges amid broad-based Canadian Dollar strength
  • Canadian Dollar is gaining ground as crude oil prices explode higher
  • USD/CAD bears push toward technical support near the 1.3000-price level
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The Canadian Dollar is advancing against nearly all FX peers on Tuesday. USD/CAD price action has turned sharply lower, for example, with the major currency pair down about 65-pips intraday and back within arms-reach of the critical 1.3000-level. CAD/JPY has climbed about 45-pips on the day as Yen selling pressure, due to waning demand for safe-haven currencies, exacerbates Canadian Dollar gains. The latest influx of CAD strength looks primarily fueled by surging crude oil prices with the commodity climbing 25% month-to-date to its highest level since March.

Learn more - CAD & Oil: Canadian Dollar to Crude Oil Correlation

USD/CAD PRICE CHART WITH CRUDE OIL OVERLAID: DAILY TIME FRAME (21 MAY TO 24 NOV 2020)

Canadian Dollar to crude oil price chart

Chart by @RichDvorakFX created using TradingView

This is weighing negatively on USD/CAD price action seeing that the Canadian Dollar tends to strengthen as crude oil rises. As such, spot USD/CAD could face further downside if crude oil prices keep extending higher. Similarly, spot CAD/JPY might continue to advance with crude oil ripping higher largely on the back of encouraging covid vaccine results. Yet, as noted in my weekly crude oil outlook, there are notable near-side risks that could undermine recent crude oil gains, which could put downward pressure on the Canadian Dollar in turn if materialized.

USD/CAD PRICE CHART: DAILY TIME FRAME (22 JUN TO 24 NOV 2020)

USDCAD Price Chart Canadian Dollar Technical Forecast

That all said, USD/CAD price action might bleed a little lower as Canadian Dollar bulls make a deeper push toward the 1.3000-level. This potential area of technical support is highlighted by the 31 August and 09 November swing lows. An ongoing Bollinger Band squeeze could offer another degree of buoyancy near the bottom of its channel. Another level for USD/CAD that might be worth keeping in mind is the one-week implied low at the 1.2981-mark as outlined in my latest USD price outlook. The downward-sloping 20-day simple moving average could be looked to as a potential area of resistance if a relief bounce comes into play.

-- Written by Rich Dvorak, Analyst for DailyFX.com

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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