Advertisement
Advertisement

USD/CAD Recovers Following Lower Oil Prices

By:
David Becker
Updated: Mar 31, 2022, 16:57 UTC

USD/CAD extends gains as uncertainty lingers over Russia-Ukraine peace talks.

USD/CAD Recovers Following Lower Oil Prices

In this article:

Insights

  • The dollar rose on limited progress in the Russia-Ukraine peace talks
  • Yields fell as investors took in inflation and macro data
  • Gold and silver prices rose due to lingering geopolitical uncertainty
  • Oil prices slide as Biden considers releasing strategic petroleum reserves  

The dollar moves higher against the Loonie as limited progress in peace talks weakens the commodity-linked Loonie. Benchmark yields declined as inflation and macro data signal 50-basis point rate hikes. Gold prices were headed for their best quarter until Biden’s oil news was released. The announcement led to easing inflation concerns and reduced demand for safe-haven gold. The dollar strengthened against the Euro and other commodity-linked currencies due to limited progress in peace talks. Oil prices fell as the Biden administration considers deploying huge oil reserves. The administration might release 180 mln barrel draw over six months, equating to 1mln barrels per day. The US stockpile of 570 mln barrels. The plan might have a more significant impact on energy prices.

In February, the PCE Deflator, which the Fed targets, jumped 6.4% from 6% in January. The PCE index measures the prices paid for domestic goods and services. The reading was the most significant increase since 1982. The data signals a more robust increase in prices of goods, while services remained little changed. Rising inflation due to the Russia-Ukraine generated concerns about economic growth. The core PCE inflation, the Fed’s preferred inflation gauge, which excludes food purchased at home and food services, rose 5.4% from a year ago. The reading was slightly under expectations of 5.5%. 

Technical Analysis

The USD/CAD recovers as the Loonie struggles with decreasing oil prices and lingering geopolitical conflict. Despite today’s rebound, the currency pair faces downward pressure and will continue to trade downwards. Although the pair crossed above the critical 1.25 level, it dipped below that and is now trading at 1.249. If the pair tested 1.26, the downward trend might be less certain. Resistance at the recent breakdown near 1.261 should cap gains. Support is seen at the horizontal trendline near the January lows of 1.246. Resistance is seen near the recent breakdown level near 1.261. Short-term momentum turns positive as the fast stochastic had a crossover buy signal.

The medium-term momentum is negative as the MACD line generated a crossover sell signal. This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day moving average of the MACD line). 

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

Did you find this article useful?

Advertisement