CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

USD CAD drops to key level as crude oil rebounds

Article By: ,  Financial Analyst
August 11, 2016 5:49 PM

USD/CAD dropped to a major support level around the psychologically significant 1.3000 level on Thursday as the US dollar remained stagnant and crude oil made a strong rebound, boosting the oil-linked Canadian dollar.

Thursday’s rebound in crude oil prices came after the International Energy Agency projected that crude oil markets would see a rebalancing within the next several months, with global oil inventories finally seeing a draw towards the end of the year. This projection reversed Wednesday’s losses that were partly driven by a surprise build in US inventories. Thursday’s oil surge helped support the correlated Canadian dollar, pressuring the USD/CAD currency pair.

Also helping to weigh on USD/CAD has been stagnation in the US dollar. After getting a sharp boost on last week’s stellar non-farm payrolls employment report, the dollar has given back its gains, and then some. This pullback is partly due to persistent doubts that the Fed will raise interest rates this year despite two months of highly positive employment data.

USD/CAD’s noted drop on Thursday to key 1.3000 support is even more significant from a technical perspective because this level is also right at the important 50-day moving average as well as the bottom of a large rising wedge pattern that has been in place since May’s 1.2500-area lows. For the entire duration of this wedge pattern, USD/CAD has been trading in a relatively tight, but slowly climbing, consolidation.

At the current confluence of support, the currency pair has dropped down to hit a critical juncture. Price action could either find strong support at this level and continue its consolidation, or it could break down. A breakdown would most likely be driven by a continued recovery in crude oil prices and/or extended weakness in the US dollar as the Fed continues to postpone raising interest rates in the face of the global trend of central bank easing. In the event of such a breakdown below the 1.3000 level, the next major downside target is at the 1.2800 support level.

 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024