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Canadian Dollar Forecast: CAD Chasing Oil Higher - Levels to Watch

Canadian Dollar Forecast: CAD Chasing Oil Higher - Levels to Watch

Justin McQueen, Strategist

CAD Analysis and News:

  • Relief Rally Across High Beta FX
  • CAD Chasing Oil Higher

Relief Rally Across High Beta FX

As equities begin to show signs of stability, high-beta currencies have regained composure with the US Dollar unwind much of its month-end fuelled gains. The Australian Dollar has been undeterred by the RBA, who ended their QE program as expected, however, emphasised that this action should not imply that a near term increase in interest rates was forthcoming. That said, the fact that the Australian Dollar has quickly retraced initial losses, further highlights that the RBA is not the key driver for the currency and ultimately, risk sentiment is the primary driver for now. Support at 0.7000, resistance at 0.7100 and 0.7140-50.

CAD Chasing Oil Higher

Elsewhere, the Canadian Dollar is playing catch up with the oil complex (Figure 1). The currency will remain a popular currency among traders, given the backdrop of a hawkish central bank. Despite refraining from pulling the trigger last week, the BoC were as hawkish as it gets. In turn, the Loonie will like meet dip buyers, as long as oil and equities remain stable. With the 100DMA situated at 1.2622, a break below opens the door for a move south of 1.2600. Key support sits at 1.2560, which would mark a full retracement of the BoC and Federal Reserve led weakness in CAD.

Figure 1. USD/CAD (Inverted) vs Oil Prices

Canadian Dollar Forecast: CAD Chasing Oil Higher - Levels to Watch

Source: Refinitiv

USD/CAD Chart: Daily Time Frame

Canadian Dollar Forecast: CAD Chasing Oil Higher - Levels to Watch

Source: Refinitiv

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

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