Chart of the day: Recovering crude prices give the CAD a nudge up
USDCAD has broken support on the four-hour chart as oil prices begin to recover and we’re reminded of the CAD’s role as a petrocurrency. If the sellers can push this pair lower, we’re looking at a trend lower towards the 1.3150 level.
This is less of a CAD story and more of an oil story. As crude demand picks up in the macro picture, the CAD is reflecting the development with a move up (USDCAD down). To put perspective on this, the 20-day rolling correlation reveals an almost perfect negative correlation (-0.96) between USDCAD and WTI crude (XTIUSD).
If the newsflow out of China continues to improve (decreasing daily virus infections and production ramping up again), the outlook for oil will improve. In the short term, the petrocurrency CAD should continue to benefit from any improvement in oil prices.
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