USD/CAD Price Analysis: Soaring Oil Pours Water on the Rally

  • Oil prices increased, driven by geopolitical tensions and disruptions in US oil output.
  • The US dollar extended its recent gains due to positive US labor market data.
  • Economists anticipate a 0.1% dip in Canada’s sales.

A bearish tone emerged in the USD/CAD price analysis on Friday, propelled by surging oil prices amid geopolitical tensions and US output disruptions. The Canadian dollar recovered from a five-week low just a day earlier, riding the wave of oil’s resurgence.

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Adam Button, chief currency analyst at ForexLive, remarked, “The Canadian dollar needed a boost from the oil market, and finally, oil saw an uptick.”

Oil rose after the International Energy Agency forecasted a robust global oil demand. Moreover, there were disruptions in US crude output caused by cold winter weather. Additionally, oil got support from a substantial weekly draw in crude inventories.

On Thursday, the IEA increased its forecast for global oil demand growth in 2024. However, its higher projection still falls below OPEC’s expectations. 

Investors are awaiting the November Canadian retail sales data release for Friday. This represents the final major economic report before the Bank of Canada’s interest rate decision next week. Economists anticipate a 0.1% dip in sales. Adam Button noted, “Friday’s retail sales report will likely highlight the contrast between Canadian and US consumers, influencing the currency more than anything.”

Meanwhile, the US dollar remained strong following positive US labor market data, which lowered expectations of a Fed rate cut.

USD/CAD key events today

  • Preliminary US consumer sentiment report

USD/CAD technical price analysis: Price likely to revisit 0.382 fib 

USD/CAD technical price analysis
USD/CAD 4-hour chart

On the technical side, the USD/CAD price is pulling back to challenge the 30-SMA support. The price met strong resistance at the 1.3500 key level. At first, it led to forming a bearish engulfing candle, showing bears were ready to take over. 

Still, the bulls had some strength to push the price above 1.3500, though it was quickly rejected above this level. Bears made yet another engulfing candle, leading to the decline towards the 30-SMA. 

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At the same time, the RSI is quickly dropping to 50, a pivotal level. There is a high chance bears will keep up the decline to break below the 30-SMA. Afterward, the price will likely retest the support zone comprising the 0.382 fib level and the 1.3400 support.

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