The Canadian dollar slumped against the US dollar ahead of the Bank of Canada interest rates decision later today. The USDCAD pair also rose because of the slumping oil prices.
Oil Prices Drop
Canada is one of the biggest producers of crude oil in the world. The country exports more than a million barrels of oil every day and the sector employs thousands of people.
The price of crude oil slumped, with WTI falling to the lowest level since 2002. As I wrote earlier, the reason for this is that Texas oil producers have started to bicker on the need for cuts. In a meeting yesterday, big oil producers like the ExxonMobil and Occidental argued against coordinated cuts. The cuts were supported by big shale producers like Pioneer Natural Resources.
The bickering by US oil producers puts the deal that was signed on Sunday at risk. This is because other oil producers will follow the US and pump more oil. Subsequently, this will lead to oversupply and lower oil prices. In another report, France-based IEA warned that oil demand will fall by a record level this year.
Bank of Canada Eyed
Investors are also focusing on Bank of Canada, which will conclude its two-day meeting today. The bank is expected to leave interest rates unchanged at the current level of 0.25%, which is its lowest level ever. Analysts also expect the central bank to announce more measures such as increasing its current quantitative easing program and setting a target for short-term bond prices.
Brent and WTI Crude Oil Drop
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USDCAD Technical Analysis
The USD/CAD pair shot up today after the price of crude oil dropped. On the four-hour chart, the pair found some significant support between the 50% and 61.8% Fibonacci Retracement level. The Fibonacci was drawn by connecting the highest and lowest points in March.
Additionally, the pair is attempting to test the upper resistance line shown in blue above. I expect bulls to prevail if the pair manages to move above this line at 1.4000.
On the flipside, the pair may attempt to retest the previous support at 1.3850.
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