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  • US-Iran conflict continues to push oil prices higher.
  • US Dollar Index erases post-New Year gains on Monday.
  • Coming up: Raw Material Price Index from Canada, Markit Services PMI from US.

The USD/CAD pair failed to break above the 1.3000 handle last week as the rising crude oil prices helped the commodity-sensitive loonie stay resilient against the USD. Wİth the oil rally gathering stream at the start of the new week amid the ongoing conflict between the US and Iran, the pair came under renewed bearish pressure. As of writing, the pair was down 0.25% on the day at 1.2968.

Oil extends gains on supply concerns

Over the weekend, US President Donald Trump threatened to hit 52 targets after Iran’s Supreme Leader Ayatollah Ali Khamenei said that “severe retaliation” was awaiting Qassim Suleimani’s murderers. 

Commenting on the latest developments, “we see a risk that the weekend’s events will be viewed as an escalation of the crisis and with a market waiting for a possible Iranian retaliation, uncertainty is expected to stay high,” said Deutsche Bank analysts. “When we combine that with the weakening of the US manufacturing cycle it does not bode well for risk appetite the coming days.”

In reaction to the heightened tensions in the Middle East, which could cause supply disruptions, the barrel of West Texas Intermediate (WTI) rose to its highest level in nearly eight months at $64.70 on Monday and before retreating modestly. As of writing, the WTI was up 1.15% on the day at $63.75.

On the other hand, the US Dollar Index is down 0.33% on the day at 96.58 to reflect a broad-based USD selloff. In the second half of the day, the IHS Markit will publish the final Services PMI and the Composite PMI figures. From Canada, the Raw Material Price  Index and the Industrial Product Price Index will be watched for fresh catalysts as well.

Technical levels to watch for