CANADIAN DOLLAR FORECAST: USD/CAD PRICE DUE FOR REVERSAL AS CRUDE OIL DROPS DESPITE OPEC+ DEAL, BANK OF CANADA MEETING LOOMS & CORONAVIRUS RECESSION RISK LINGERS
- The Canadian Dollar[1] looks like it might come back under pressure with crude oil[2] after the OPEC+ deal disappointed markets
- USD/CAD[3] price action eyes trader sentiment surrounding coronavirus recession risk and a scheduled monetary policy update from the Bank of Canada
- Spot USD[4]/CAD could ricochet higher off a major technical support level after falling nearly 700-pips in three weeks
The Canadian Dollar participated in a broad-based rally against the US Dollar[5] last week. Growing coronavirus optimism[6], driven by a deceleration in new COVID-19 cases, intensive care admissions and deaths, likely contributed to the protracted US Dollar pullback and 1.5% decline in USD/CAD last week.
USD/CAD price action now trades roughly 5% below its year-to-date high printed on March 19 – the strongest reading notched by the major currency pair[7] since early 2016. The Canadian Dollar may surrender recent gains against its USD peer, however, as crude oil prices drop despite the OPEC+ deal.
USD/CAD & CRUDE OIL PRICE CHART: 4-HOUR TIME FRAME (DECEMBER 2019 TO APRIL 2020)
Chart created by @RichDvorakFX[8] with TradingView[9]
Even though crude oil plunged about 20% last week, the Canadian Dollar interestingly climbed against safe-haven currencies like the US Dollar and Yen[10]. Correspondingly, the correlation between crude oil and USD/CAD price action turned positive, which contrasts the inverse relationship generally held by the direction of the Canadian Dollar and crude oil.
That said, the Canadian Dollar might face selling pressure once the CAD to oil correlation[11]
