- Rebound in crude oil prices adds to the negative tone in USD/CAD.
- Pair is testing the 1.3100 area, down more than 100 pips since the beginning of the week.
The USD/CAD pair reached a fresh 4-month low during the American session amid a recovery in crude oil prices and the ongoing relative strength of the Loonie over the US Dollar.
The calm before the G20
On a quiet session for markets ahead of the G20 meeting, the US Dollar is falling modestly against commodity currencies and is posting mix results against its European rivals. The DXY is up 0.03 %, US yields modestly lower and the DOW JONES gains 0.20%.
The WTI barrel is up 0.20% after raising $1, back above $59.00. The rebound in crude prices reinforced the positive tone of the loonie that reached the highest level since early February versus the US Dollar. USD/CAD dropped to 1.3098, and as of writing, it is hovering around 1.3100. So far, it has been unable to make a bearish run below 1.3100, but the short-term trend points strongly to the downside. Extreme oversold conditions should be seen as a sign of caution.
The divergence in monetary policy expectations, with the Federal Reserve expected to cut rates soon, and the Bank of Canada seen at the moment on hold for some time, continues to be a key negative factor for USD/CAD. It is about to post its seventh decline out of the last eight days. While data in Canada has surprised modestly to the upside, in the US continues to signal deceleration.
Today’s US economic reports had no impact on markets. On Thursday, the calendar is busy in both countries. In the US with the personal income and spending report is due (includes the Core PCE) and also consumer confidence numbers while in Canada with April’s GDP, wholesale inflation and the Business Outlook Survey released by the Bank of Canada.
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