A sharp decline in crude oil prices on Monday has led to a two-day rise in the USD/CAD. This scenario has enabled the pair to trade above 1.2500 once more.
Despite a weaker-than-expected US ISM Manufacturing PMI number, the greenback held its own against the loonie, rising 0.26% on the day as of writing.
Weighing on the risk-sensitive, oil-linked loonie was the rise in new cases of the delta variant of COVID-19 and the decline in China’s factory activity for July. These two factors led to a steep selloff in the WTI and Brent Crude oil benchmarks, pressurizing the CAD in the process.
Technical levels to Watch
The two-day price rise comes off a correspondingly inverse slump in crude oil prices over the last two trading sessions. News data and the upper border of the evolving wedge pattern have limited the upside move. However, a resumption of a strong upside push, leading to a breakout of the falling wedge, allows the pair to aim for a measured move at 1.26477. This move must take out the immediate barrier at 1.25873 in the process.
On the other hand, rejection at the upper wedge border and an accompanying decline could test 1.24790 and 1.24489 on the way to the wedge’s southern border. If the price breaks below 1.23998, the wedge is invalidated, and the pathway towards 1.23677 and 1.23142 becomes clearer.