The Canadian dollar continued advancing against the US dollar in the new month and quarter. USD/CAD got close to the 1.0150 support line several times in the previous week, and this was finally broken, after a battle.
The loonie enjoys the relative calm in Europe, after the EU Summit. In addition, the leap in the price of oil (mostly on Iran) pushed the pair closer to parity.
European relief (for now)
Canadians enjoyed a long Independence Day weekend and also their currency enjoyed gains. This cam despite the sour mood from the US, its biggest market. ISM Manufacturing PMI fell into contraction territory and badly disappointed.
Nevertheless, markets in Europe remain calm despite the doubts about the EU Summit. Holland and Finland expressed their rejection to using the bailout funds to buy bonds directly. They don’t have a majority to overrule the decision, but this is certainly not helping.
Nevertheless, the promises hold for now.
Oil on the rise
The C$ enjoys the rise in oil prices. WTI Crude jumped from around $84 to $88 before retreating. Brent topped $100. As an exporter of oil, Canada enjoys rising prices. It’s important to note that falling oil prices didn’t hurt the currency so much.
The reason for rising oil prices is mostly Iran:
- Iran made a test of medium range missiles, capable of hitting Israel.
- Talks between Iran and the 6 nations (permanent UN security council members + Germany) are basically on the verge of collapse.
- The Iranian parliament is discussing a law that will close the Straights of Hormuz to ships of nations involved in an oil embargo against it.
- The EU oil embargo came into effect on July 1st.
In recent months, when Iran was out of the picture, oil reacted to worries and hope of global growth. It now focuses on Iran, ignoring the warning sign from the US manufacturing PMI.
On the charts, USD/CAD has quite a bit of room to fall: 1.0050 is the next line, followed by the obvious line of parity. 1.0150 is now resistance.
For more, see the Canadian dollar forecast.
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2 Comments
USD/CAD has fallen to the major support of the 50% retracement and 200 Period MA’s on the daily chart.
Let’s see what happens with oil and the USD/CAD with the ECB meeting and the antipated rate cut.
Thanks Dan! I believe that the rate cut will be welcomed by the markets, thus pushing the Canadian dollar higher (USD/CAD lower) together with other risk currencies.
On Friday things could change with the employment report in the US…