The USDCAD pair dropped today as investors reacted to the price action in the oil market. The pair slipped from the day’s high of 1.4233 to an intraday low of 1.4118.
Crude oil price stabilises
Canada is a major oil producer, which means that the Canadian dollar tends to react to the movements in oil prices. In the past two days, the currency has dropped by more than 2% against the dollar because of the low oil prices. The pair also declined slightly today as the price of Brent moved to a 22-year low.
The USD/CAD pair declined slightly as the price of crude oil started to stabilise. Brent moved from a 22-year low and bounced by more than 5% to $20.50 per barrel. The battered West Texas Intermediate (WTI) rose by more than 15% to $13 per barrel. While these prices are still low, they managed to provide some support to the Canadian dollar.
Canada CPI data
Traders also reacted to the disappointing inflation data from Canada. According to Statistics Canada, the headline CPI dropped by 0.6% on a monthly basis. This was worse than the consensus estimates of -0.4%. The CPI was also below last month’s increase of 0.4%. The closely-watched core CPI rose by 0.1% in March after rising by 0.7% in the previous month.
The price declined from February’s 2.2% on an annual basis to 0.9%. These were the worst numbers released in recent memory. According to Statistics Canada, the main reason for the decline was low energy prices and the low prices of clothing.
These numbers paint of what to come as the coronavirus pandemic continue to ravage Canada. The number of patients has continued to rise. At the same time, the central bank and the government have announced several measures to stabilize the economy.
Looking at the four-hour chart, the USDCAD dropped after finding some resistance near the 23.6% Fibonacci Retracement level. This retracement was drawn by joining the lowest and highest levels in March.
The price is also attempting to retest the important support shown in green below. Therefore, I expect the pair to move lower and possibly retest the 50% retracement level at 1.4090.
On the flipside, because of the volatile oil prices, it is possible that the pair will resume the upward trend and attempt to retest the 61.8% retracement level at 1.4300.