The USDCAD has seen its strong upside push capped at the 1.42746 resistance as crude oil price on the WTI benchmark recovered overnight to just under the $27 mark. The USDCAD has experienced an enormous surge in the last month after crude oil prices collapsed on the Saudi-Russia price war. The recovery in crude oil price occurred after it was announced that Russia would participate in the April 9 meeting of OPEC + called by Saudi Arabia to stabilize oil prices.
However, crude oil price action also seems to be waiting for further direction on the proposed output cuts, although there is not much optimism that the proposed cuts will raise prices by much. Storage spaces are starting to fill up, and demand for the product continues to remain low as the coronavirus pandemic rages.
Further direction on this pair would come from the OPEC + meetings and also the Canadian Employment Change data which are scheduled for release on the same day.
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Technical Outlook for USDCAD
The USDCAD is now finding support at the 1.40291 price level, following the stall of the recovery on crude oil price. However, 1.39230 (27 March 2020 low) is the critical support level to watch. I prefer to use the range that extends from 1.40291 to 1.39230 as the support zone that decides further price action on a technical basis.
Price action on the USDCAD has formed lower highs, and the RSI is trending downwards. This setup may suggest that the USDCAD has peaked and may be due for a correction. This setup can be confirmed from the weekly chart where the last four weekly candles have all closed with lower highs.
A breakdown of the support zone identified above targets 1.37629 (17 March 2020 low and 9 March 2020 high in role reversal). Below this price level, further support appears at 1.36235.
On the flip side, a bounce from the support zone may allow the USDCAD to retest recent highs, first at 1.41514 and 1.42746 (26 March, 1 April and 6 April 2020) in the short-term. Above this level, 1.45575 could become relevant, after which the USDCAD marches into territory not seen since Jan 2016. This move is supported by a further weakening in the crude oil price (which may come from a failure of OPEC + to deliver output cuts), or from poor Canada Employment data on Thursday.
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