Will Oil Drive USD/CAD to 1.30?

Will Oil Drive USD/CAD to 1.30?

Will Oil Drive USD/CAD to 1.30?

One of the biggest stories today was the sharp decline in oil prices. WTI Crude dropped 2.25% to $43.83, its lowest level since March 2009. Canada is a major oil producer and extremely sensitive to the price of crude. The last time we heard from the central bank, they signaled that rates would not be lowered again this year but if crude prices fall below $40 a barrel, they may have to reconsider their position. We will learn more about Canada’s inflation situation later this week but lower prices will drive down inflation expectations across the globe so even if CPI increases in February like economists expect, it could fall again in the coming months. This possibility could weigh heavily on the loonie, especially if oil continues to fall and that dynamic could drive USD/CAD to 1.30.

Taking a look at the monthly chart of USD/CAD there is resistance at Friday’s high of 1.2824 but above that, there is no major resistance until 1.30. Near term support is at 1.26 with more significant support at 1.2350.

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