The Loonie is suffering from short end of stick today as oil prices fail to build off yesterday’s rebound and risk sentiment continues to stutter in broad market with key equity markets across the globe suffering a bearish rout. Although off the lows for today, WTI is still down by 0.7% currently trading at $66.88 and the weaker sentiment across risk assets isn’t helping to keep the loonie afloat. Right now, the hawkish interpretation of Poloz and the Bank of Canada is all but forgotten as the drop seen in USD/CAD has all but been erased. Fundamentally, there are reasons for the loonie to rally but yet it is struggling, this is viewed by many investors and analysts as a bearish sign owing to multiple factors such as it has been a case of setbacks for loonie buyers over the past few months. As of writing this article, the USDCAD pair is trading at 1.3142 up by 0.53% on the day.
Crude Oil Price Decline Is Main Supporting Factor For USD Bulls
The USD/CAD pair caught some aggressive bids on Friday and climbed to six-week tops, around the 1.3140 region during the early European session. The pair extended the post-BOC rebound from one-week lows, near the 1.2970 region, and built on the positive momentum further beyond the 1.3100 handle, reversing all of its weekly losses. A weaker tone around crude oil prices seemed to be the only factor weighing heavily on the commodity-linked currency – Loonie and driving the pair higher. Apart from the weakening oil prices, the strong intraday up-move lacked any obvious fundamental triggers and seemed rather unaffected by a subdued price action around the US Dollar, which was consolidating overnight strong gains to over two-month tops.
Risk averse investor sentiment in broad market seems to be affecting Loonie’s momentum in broad market as well. Hence, investors are now prudently waiting for a strong follow-through buying to see if the up-move is led by a fresh bullish breakout or is only a stop run. Traders have started to reposition for today’s important US macro data – the advance Q3 GDP growth figures, due for release later during the early North-American session. From technical standpoint, immediate resistance is now pegged near the 1.3160 level, above which the pair seems all set to surpass the 1.3200 handle and test 1.3225 supply zone. On the flip side, the 1.3100 handle now becomes an immediate support to defend and is followed by 100-day SMA support near the 1.3075-70 regions.
This article was originally posted on FX Empire
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