The Canadian dollar is under pressure once again. USD/CAD made a move above the double top of 1.28 on Friday but retreated. It continued battling this line and traded in a range that reached 1.2760.
Will the rapid fall in oil prices send it to new highs? Is 1.30 getting closer?
Oil and CAD
WTI Crude Oil already recovered to $55 at one points, but stabilized around $50. This stability is now over. After leaning towards the bottom of the range around $48, oil prices are now digging the bottom of the barrel just above $43. Also other prices such as Brent and Western Canadian Select which is relevant to Canada are on the back foot.
The rise in inventories and the increased US production (despite the slide in the rig count) are erasing the short lived “bull market” that oil prices enjoyed.
With Canada’s critical export losing ground, so does the C$. The loonie does not look to the OK jobs report and a relatively upbeat Bank of Canada.A fresh data point from Canada, foreign securities purchases, is also helping: 5.73 billion instead of a negative number. Oil prices are also weighing on the Norwegian Krone (NOK).
US rate hike
The pair is also moving up thanks to the strength of the US dollar. The markets understand the importance of solid core inflation and strong jobs growth: a rate hike in June is being priced in more and more.
And this means that the latest data is ignored, even if it’s bad: industrial output rose by only 0.1%, less than 0.3% expected and with a downwards revision. The Empire State Manufacturing Index is down to 6.9 points from 7.8 last month and below expectations.
It does not really matter. Yellen is eyed.
USD/CAD
The high on Friday has been 1.2820, and the pair is not too far from that point. 1.28 still plays a pivotal role ahead of 1.2760.
The big 1.30 level is looming above.
More: CAD: Staying Short; – Credit Agricole
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