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CAD capitulates with crude – retracing previous gains

The Canadian dollar ignored quite a few fundamental figures in recent weeks  and had a nice ride  alongside the climbing price of oil.  The rally in oil did not make too much sense, and when  the eventual slide comes around, CAD follows.

USD/CAD is trading at 1.2950, around 200 pips above the lows of 1.2760 seen just on Friday. The high mark for the pair was 1.2958. So far, the move is well sustained.

WTI Crude Oil did not make it to $50 and slid below the $48 mark and trading at $47.60 at the time of writing. Why was the rise unjustified?

As we discussed in our latest episode, the supply and demand picture is not entirely positive for oil prices. US oil production is on the rise and so is potential OPEC production. Demand is forecast to rise, but it isn’t anything earth-shattering. The move higher was partially fueled by speculation that OPEC members such as Saudi Arabia could coordinate a production freeze or cut with Russia.

The move higher was partially fueled by speculation that OPEC members such as Saudi Arabia could coordinate a production freeze or cut with Russia. Such speculation was also rampant back in the Spring. The Doha Summit was a hyped event that resulted in an abrupt breakup of talks There is no love lost between all the sides and suspicion is in abundance.

While the fall we are seeing today may be temporary and just a necessary correction after the rally, it is hard to see another prices go much further.

And for CAD, this means weakness. Maybe the recent Canadian jobs report is meaningful after all?

Here is the USD/CAD chart:

USDCAD August 22 2016 rises with crude

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.