USDCAD opened today’s trading with a 134-pip weekend gap following news of an oil price war. The currency pair opened at 1.3542 and trended higher, tapping its highest level since June 2017 at 1.3756. As of this writing, USDCAD is at 1.3639.
The Canadian dollar was heavily-hit by news of an oil price war declared by Saudi Arabia. Crude oil is Canada’s largest export. Consequently, Saudi Arabia’s announcement to hike its production means that a significant increase in supply would push oil price lower. This then translates to lower income for Canada, hence the weakness in the Canadian dollar.
This move by Saudi Arabia was triggered by the breakdown of OPEC+. Russia refused calls for higher production cuts. In response, Saudi Arabia is moving to take a bigger market share by increasing its production and offering discounts to its oil price.
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USDCAD Outlook
On the weekly chart, we can see that there is some hesitation around 1.3640 on USDCAD. This price also served as resistance for the currency pair on December 30 and if there are enough buyers in the market, USDCAD could soon trade lower. There is a confluence of support around 1.3430. For one, this price coincides with the 38.2% Fib level (when you draw from the low of January 5 to today’s high). Secondly, the price coincides with the broken trend line (from connecting the highs of December 30, 2018 and May 26, 2019).
Conversely, if buyers are able to sustain their rally, we could see a strong close above December 23, 2018’s high at 1.3660. It could then mean that USDCAD is on its way to its May 2017 highs at 1.3791.
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