USD/CAD resumes upside surge after oil-driven pullback
James Chen September 2, 2015 11:00 PM
<p>When crude oil prices shot up dramatically in the last few days of August, the oil-correlated Canadian dollar also appreciated against the US dollar, as […]</p>
When crude oil prices shot up dramatically in the last few days of August, the oil-correlated Canadian dollar also appreciated against the US dollar, as might have been expected, placing pressure on the USD/CAD currency pair. Given the magnitude of the crude oil surge, however, USD/CAD pulled back only modestly due to the broad-based strength of the US dollar during the same period.
Currently, as crude oil in the first two days of September has given back nearly half of the gains made during the last days of August, USD/CAD has begun to resume its seemingly relentless push to the upside.
Data from the US Energy Information Administration on Wednesday showed a large stock build of 4.7 million barrels against prior expectations of a 700,000 barrel decrease. This data follows Tuesday’s release from the American Petroleum Institute that showed a massive stock build of 7.6 million barrels.
These data points highlight persistent oversupply conditions that have served to pressure the price of crude oil and the Canadian dollar in the last several months while further propping up a consistently strengthening USD/CAD.
The pullback that occurred at the end of August brought USD/CAD down to a relatively shallow low of 1.3115 before rebounding on the first day of September. That low dipped only slightly and briefly below a sharp uptrend support line extending back to mid-June’s low.
From a longer-term perspective, USD/CAD’s uptrend extends all the way back for three years to September of 2012. This bullish trend accelerated even further to the upside in July of last year.
With little in the way of a lasting resolution to the massive oversupply situation for crude oil, as well as a persistently strong US dollar, the directional bias for USD/CAD continues to be to the upside. Of course, on the US dollar side of the currency pair, much will likely hinge on continuing speculation over a Fed rate hike decision and Friday’s employment data, which should help provide some impetus for that decision.
In the event that USD/CAD continues its surge above last month’s 11-year high of 1.3353, the immediate upside target continues to reside at 1.3400, followed by the 1.3600 resistance objective.
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