Crude Oil and USD/CAD – The Beginning Of A New Trend?

It has been an interesting period for Crude Oil. I have spotted a possible reversal pattern at support level above 47.00. It seems that the last candle is a small rejection candle just slightly above the support level.

One potential scenario that traders will be focus on is for the price to bounce off and reach the 50.00 level. As we have recently seen, the 50.00 level was a strong level and prices consolidated around that level for a while. If prices will retest this level, then I will be looking for two things:

• Rejection of the 50.00 level and further slide to the downside at least until 47.00 again.
• Breakout from this level and a potential rise towards 54.00.

If the second scenario applies, this would give us profit of around 12.5%. Although quite optimistic, it is a possible scenario and one which could easily turn into a major buying opportunity.
Keep an eye for the Crude Oil Inventories today at 15:30 GMT.

How Does That Relate to the USD/CAD?

There are many products that can be manufactured from one oil barrel.
Technological advances made oil extraction cheaper and faster. Within time, new inventions and discoveries made oil-derived components useful (e.g. petrochemical industry boom is only starting).
That’s especially true in Canada. The Canadian economy is an energy driven one, and as such, the oil industry plays an important role in the Canadian GDP.
The Central Bank of Canada closely watches and adjusts its monetary policy according to money supply which obviously significantly affected by oil prices.
The Canadian employment is also highly affected by the oil industry, therefore, oil prices fluctuation have a strong influence on the Canadian economy and its currency.

Hence, an increase in crude oil prices will support the Canadian dollar and vice versa.

Currently, the USDCAD is below a major resistance area (red line). It is expected that the daily candle will end up as a bearish one. The above signals a bearish momentum for the pair. Together with Crude oil, this could be the beginning of a trend reversal.

A possible scenario for USDCAD might be:

• The daily candle closes as a bearish – this would give a good reason to buy the Canadian and sell the USD.
• The daily candle rejects the lows, therefore no bearish engulfing candle form on the daily chart. Then, the uptrend is more likely to continue.

This post was originally published by ColibriTrader