USD / CAD Recovers Above 1.2600 Level As USD Moves Up, Crude Oil Prices Stagnate

• USD / CAD has recovered north of the 1.2600 level in recent trading to hit new weekly highs.
• A combination of USD strength and crude oil price weakness is behind the move.

The USD / CAD it has rallied above 1.2600 in recent trading to hit fresh weekly highs. That means that after a day of trying, the pair has been able to convincingly break above its 21-day moving average, which is currently at the 1.2570 low.

Short-term USD / CAD bulls are now likely to target a test of the 50 DMA at 1.2656 for the next few sessions, just about 40 more pips above current levels, which is not much of a surprise given that the pair has already recovered 70 pips from session lows at 1.2540 to current levels at 1.2610. On the day, the USD / CAD is trading with gains of about 0.4% or about 50 pips.

Performance of the day

Two main factors are driving USD / CAD higher on Thursday. First, the pair is getting support from an ongoing recovery in the USD, amid a defensive market tone as markets worry about rising Covid-19 cases and the lockdown in Europe and other economies. key emerging markets, as well as amid rising tensions between China and Russia (sanctions have been launched everywhere this week).

Second, the loonie woes are being made worse by a sharp downward correction in crude oil prices, which has now virtually wiped out Wednesday’s gains (WTI is trading again back to lows of $ 58.00, down almost 3.0 $ or about 4.5% on the day); The positive momentum of the news of the Suez Canal blockade appears to be waning as markets refocus their attention on the worsening outlook for crude demand in Europe; According to Rystad Energy analyst Bjornar Tonhaugen, “If Europe were in a better state in its battle against COVID-19, then the disruption would possibly create a more protracted problem, but this is not the case … That is why today’s traders quickly corrected some of the previous day’s gains. “

As for the latest on the Suez blockade; The Suez Canal Authority says eight tugs are currently working to move the 400-meter-long container ship that is currently blocking traffic in both directions on the canal. Peter Berdowski, CEO of Dutch company Boskalis, the company that operates the tugs, said “we cannot rule out that it could take weeks, depending on the situation.”

But with most major EU nations reverting to some form of relatively strict lockdown to contain rising rates of infection, hospitalization and death from Covid-19 (the widely touted ‘third wave’ of the virus in the EU) and the launch of the bloc vaccine is still lagging in comparison for countries like the US and the UK, it is likely that the demand for crude oil in Europe in the coming months (which is the destination of most of the tankers that trying to cross the blocked Suez Canal) is affected, which will likely compensate for any temporary supply disruption. There is also growing concern about the direction of the pandemic in major emerging market economies; new cases in Brazil and India are at record levels, with the latter moving increasingly toward vaccine nationalism and threatening to block AstraZeneca’s vaccine exports.

Looking ahead, the main driver for crude prices (and by extension the Canadian dollar) next week will be the OPEC + meeting on April 1 (next Thursday). As noted above, recent higher-than-usual levels of volatility in the crude oil market could continue to enter the meeting as various OPEC + sources filter the varied views of cartel members entering the meeting. the discussions; Most agree that another surge is unlikely at this point given 1) the above-mentioned demand concerns in Europe and elsewhere and 2) the recent sharp drop in prices from monthly highs (the WTI it is currently trading more than 13% below its high of just under $ 68.00) – OPEC sources said Wednesday that a renewal of current production levels is the most likely outcome.

Technical levels