The price of the black gold doesn’t have a Labor Day Holiday. Major indices are falling amid ongoing worries about China.
This weighs on the Canadian dollar, with USD/CAD crossing the 1.33 line. The double top at 1.3325 looms. Will we see a breakout now?
WTI is down to the $44 handle and Brent is around $48. This is a slump after the big recovery.
Prices of oil have already been lower, but the market wants to sell the C$: the Canadian dollar slides with every fall in oil prices and only partially recovers when oil bounces back.
And even WTI still keeps a safe distance from breaking below $40, there is a growing notion that the low prices are here to stay. The Chinese stock markets reopened after the holiday and they closed lower.
Worries about Chinese growth continue casting dark clouds about the whole global economy and this means that demand for oil in the near and not so near future will likely be low.
USD/CAD is trading at 1.3301 at the time of writing after having reached 1.3309. The double top is at 1.3325 (as the chart below shows). Can it break higher?
As this is Labor Day both in the US and Canada, liquidity is very thin, so a move above this level could happen, but could see no follow through once markets fully come back online.
And there’s another big event for the loonie this week: the decision by the Bank of Canada. Stephen Poloz and his colleagues are unlikely to cut the interest rate for the third time this year, but anything can happen. A dovish message, now that Canada is officially in recession, is on the cards from the BOC.
Support awaits at 1.3220 with more at 1.3120.
More:
- CAD: Looking For A BoC Cut Or Not Yet – Credit Agricole
- Not Just A ‘Current’ Problem For CAD – CIBC
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