The USDCAD prices continued to move higher during the course of the last 24 hours and the prices have managed to reach the important region of 1.2750 as of this writing and it remains to be seen what the prices would now begin to do. The rise in the prices has been due to several factors but the oil prices have also been a contributing factor, though not very obvious.
USDCAD At Tipping Point
When the pair was in a strong downtrend, one of the notable features was the fact that the oil prices continued to rise steadily and at one stage the oil prices had completed a 20% move within a matter of a few weeks. This rise in the oil prices continued to support the CAD as the Canadian economy depends a lot on the oil prices. So, apart from the weakness in the dollar, we saw strength and support for the CAD from the rising oil prices which helped to fuel the downtrend.
Over the last few days, the oil prices have been chopping around and have been unable to hold on to their gains and this had begun to affect the CAD. Add to this, the strength in the dollar and this has now helped the pair to recover a few hundred pips. It remains to be seen whether this recovery is a full fledged move or whether this is just a correction of the downtrend. Opinion is divided on what kind of a move this is as one part of the market believes that the BOC would continue with its aggressive stance and hence likely to further hike the rates in the near future. On the other hand, the Fed is not so sure of hiking rates further unless the incoming data supports the move.
This is why, the CPI data coming in today could bring in a tipping point. A strong inflation reading would mean that the Fed is likely to hike one more time this year which should be dollar supportive. If not, then we could see the correction getting over and the USDCAD pair dropping back to the lows of its range.
This article was originally posted on FX Empire
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