The USDCAD pair declined today as the market reacted to the surging crude oil price. The pair dropped to an intraday low of 1.4000 as the Canadian dollar continued to surge. The CAD also gained against other peers like the British pound and euro.
Crude oil price comeback
Canada is the fourth-biggest crude oil producer in the world after the United States, Saudi Arabia, and Russia. The country produces more than 5.5 million barrels per day, according to the EIA. Therefore, crude oil price tends to affect the Canadian dollar and the USD/CAD pair.
The price of crude oil rose today as the market reacted to several demand and supply issues. On demand, consumption has returned to the pre-coronavirus levels in China, according to Bloomberg. Bloomberg also reported that the number of tankers used for storage at sea have started to decline.
In addition, US producers have slashed their active rigs to above 200 in the previous week. At the current pace, there is a likelihood that the number of active rigs will decline to below 200 this year.
Finally, with most countries reopening, there is a possibility that demand will continue increasing.
Canadian dollar gains ahead of Canadian inflation data
The USDCAD also dropped ahead of the important inflation data. Statistics Canada will release the consumer price index on Thursday. The headline numbers are expected to show that the headline CPI dropped by -0.3% in April. On a year on year basis, the CPI is expected to rise by just 1.2%. Meanwhile, the core CPI is expected to drop by about 0.2%.
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USDCAD technical outlook
The USDCAD pair is trading at 1.4012, slightly higher than the intraday low of 1.4000. On the daily chart, the price is along the 61.8% Fibonacci retracement level. It is also above the 50-day and 100-day exponential moving averages. The price also appears to be forming a bearish pennant pattern. It is also inside the Ichimoku cloud. This means that the price may breakout lower as bears attempt to test the 50% retracement level at 1.3797.
On the flip side, a move above the upper resistance of 1.4300 will invalidate this trend. This is an important psychological level and also the 78.6% retracement level.