Another day, another new multi-year low in oil: both WTI and Brent have started the trading week on the back foot, declining to new nearly 6-year lows at 46.50 and 48.25 respectively. There wasn’t a specific economic catalyst for the drop in oil; instead downgrades from major international banks drove oil prices lower. Goldman Sachs cut its 2015 forecast for oil prices down to $47.15/barrel, down from $73.75 previously, while Société Générale cut its forecast to $55 from $70 previously. Of course, the question of why traders are influenced by volatile and unreliable bank forecasts is beyond the scope of this (or perhaps any) article.
Nonetheless, the drop in oil prices is having a clear knock-on effect on the Canadian dollar. Afteraccelerating out of its bullish channel last week, the North American pair has rallied to a new 5.5-year high above 1.1900 thus far this morning. The MACD indicator is predictably showing strong bullish momentum, though the RSI suggests rates are now overbought. As we’ve noted before though, it takes an excess of buying pressure to created an “overbought” reading in an oscillator by definition, so while the RSI may serves as near-term warning sign, it is not a reason to question the health of the established bullish trend at this point.
As long as the top of the broken bullish channel holds as support, USDCAD bulls may look to key psychological resistance at 1.20 next, though traders should also keep an eye on this week’s data-packed calendar for any fundamental catalysts.
Key Economic Data/News that May Impact USDCAD this Week (all times GMT):
Ø Today: BOC Business Outlook Survey (15:30), Speech by FOMC Member Lockhart (17:40)
Ø Tuesday: US JOLTS report (15:00), US 10yr Bond Auction (18:00)
Ø Wednesday: US Retail Sales (13:30), US Business Inventories (15:00), US Crude Oil Inventories (15:30)
Ø Thursday: US PPI, Initial Unemployment Claims, Empire State Manufacturing (13:30), Philly Fed Manufacturing Index (15:00)
Ø Friday: US CPI (13:30), US Industrial Production (14:15), UofM Consumer Sentiment (14:55)
