Canadian Dollar Receives Support From A Surge In Oil Prices Following Trump Tweet
The release showed that as many as 6.6 million Americans applied for unemployment benefits, which is a new record. Clearly, the coronavirus containment measures are putting heavy pressure on the real economy.
Soon, the Canadian dollar got sudden support from a surge in oil prices. U.S. President Donald Trump tweeted that Russia and Saudi Arabia could cut oil production by 10 million barrels.
In a later tweet, he added that the production cut could be as high as 15 million barrels. No official deal has been announced yet.
I’d note that the market clearly viewed the original tweet as an indication that Russia and Saudi Arabia are ready to cut production by 10 million barrels per day, but the President’s tweet did not contain the “per day” part.
The following tweet about a potential 15 million barrels production cut clearly eliminates the “per day” possibility since it is obvious that Russia and Saudi Arabia would not halt the majority of their production capacity.
However, some deal may be in the works and support oil prices, which is a bullish factor for the Canadian dollar.
USD/CAD continues to receive support near the 20 EMA at 1.4070. If this level is breached, USD/CAD will lose the current upside momentum and slide towards the next support level at 1.3925.
In my opinion, the downside breach of the 1.4070 level would likely mean the change of the local trend for USD/CAD.
On the upside, a new resistance level has formed in the 1.4270 area. This area is the first obstacle on the pair’s way to the major resistance at 1.4330.
Broader U.S. dollar strength might help to breach this level since the U.S. Dollar Index has managed to get above the psychologically important 100 level after the disappointing Initial Jobless Claims data.
However, the current oil price strength will continue to support the Canadian dollar in the near term unless the market gets some bad news about the potential production cut deal.
This article was originally posted on FX Empire
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