USDCAD in focus

With the Easter long weekend and Anzac Day holiday falling closely together in Australia this year, many have taken the opportunity to take the remaining three business days off this week, to enjoy a 10-day holiday break.

USDCAD which usually displays a negative correlation with crude oil also seems to be on a holiday hiatus, falling barely 50 pips, despite crude oil prices rallying over 2 ½% overnight. The rally in crude oil followed reports that the Trump administration would not reissue sanction waivers (due to expire on May the 2nd) which previously allowed some countries, including China and Turkey to import Iranian oil.

The crackdown on Iranian oil exports and revenues, comes at a time when the upside risks for the crude oil price are building. Venezuela’s oil exports have been crippled by U.S. sanctions, war continues in Libya and Saudi Arabia has slashed its output. All of which counter the Trump administrations stated desire for a lower oil price.

Possibly USDCAD is in a holding pattern ahead of the Bank of Canada (BoC) interest rate decision due at midnight Wednesday, Sydney time. The BoC are expected to leave interest rates on hold at 1.75%, and shift to a neutral policy bias, dropping any reference to future rate hikes.

Keep in mind that a neutral bias does not preclude further interest rate hikes. Should the oil price remain supported and U.S. data picks up after a slow Q1, it will positively impact Canadian domestic data and once again the market will be thinking about BoC rate hikes and a lower USDCAD.

Turning to the charts, USDCAD has been trading with an upward sloping trend channel since September 2017. The support from that trend channel currently sits around 1.3250. Providing crude oil prices remain supported, I would view a break and close below 1.3250 as an indication that a retest of this year’s 1.3069 low is underway. Traders may also use a spike higher towards 1.3500/1.3600 as an opportunity to set USDCAD shorts.

Source Tradingview. The figures stated are as of the 23rd of April 2019. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation