USD/CAD breaks out to new high as crude oil continues slide
James Chen July 26, 2016 1:17 AM
<p>USD/CAD climbed slightly above key resistance around the 1.3200 level on Monday, primarily due to the Canadian dollar having been dragged down by falling crude […]</p>
USD/CAD climbed slightly above key resistance around the 1.3200 level on Monday, primarily due to the Canadian dollar having been dragged down by falling crude oil prices. As concerns over crude oil oversupply continue, both the West Texas Intermediate and Brent benchmarks slid to new lows on Monday, extending their retreat from June highs.
As a result, the oil-linked Canadian dollar continued to be pressured, boosting the USD/CAD currency pair up to the noted 1.3200 resistance area. The past week has seen substantial gains for USD/CAD as the US dollar has remained supported ahead of this week’s Fed meeting, while the Canadian dollar has fallen sharply in conjunction with crude oil.
The recent rise for USD/CAD prompted a breakout last week above the upper resistance border of a large triangle consolidation pattern that has been in place since the 1.2500-area lows in early May. Mid-July saw a bounce off the lower support border of this triangle, which resulted in the rally within the past week.
Having reached slightly above 1.3200 resistance as of Monday, the currency pair has hit a critical technical juncture. Continued upside momentum above 1.3200 this week could be prompted by a more hawkish-than-expected Fed statement on Wednesday, which would support the US dollar, or a continued slide for crude oil prices, which would further pressure the Canadian dollar. If either or both of these conditions occur, a sustained breakout above 1.3200 would confirm a follow-through of the triangle breakout, with the next major upside targets at the 1.3400 and then 1.3600 resistance levels.
GAIN Capital UK Limited (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.