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USD/CAD to 1.15 on Big Drop in Oil
Oil prices collapsed in relatively thin trading on Friday, sending USD/CAD sharply higher. Crude prices fell more than 10%, to its lowest level since September 2009. On Thursday, OPEC decided against an output cut that could have carved out a bottom for oil but instead, it led to a deep sell-off. Their decision suggests that they no longer wants to bear the burden of lower prices alone and want other producers to adjust their production as well. Considering that most traders have not returned from their Thanksgiving Day holidays, we fear that oil prices will move even lower next week, closing in on $60 a barrel. If traders continue to drive oil prices lower on Monday, USD/CAD should hit a fresh 5-year high.
Taking a look at the monthly chart of USD/CAD if the currency pair breaks its current 5 year high of 1.1467 1.15 will serve as near term resistance but 1.1540, the 38.2% Fibonacci retracement of the 2007 to 2009 rally will be the key level to watch. On the downside, 1.12 remains support for USD/CAD.