- USD/CAD gains bullish momentum and breaks above the 1.3000 level on Tuesday.
- Crude oil prices are down more than 6% on the day on worsening demand prospects.
- The dollar benefits from risk aversion, fueling the pair’s rally.
The pair USD/CAD has broken above the 1.3000 level and has reached its highest level in two weeks. The strength of the dollar and the drop in crude oil prices allow the pair to maintain its bullish momentum during the American session.
Falling oil prices hurt the CAD
Investors are increasingly concerned about the global recession and the outlook for energy demand. The West Texas Intermediate Barrel (WTI) is now down 6.6% on the daystanding at $103.20, which weighs on the CAD, a currency linked to commodity prices.
At an energy conference in Nigeria, OPEC Secretary General Mohammad Barkindo said on Tuesday that “the ongoing war in Ukraine, the ongoing COVID-19 pandemic and inflationary pressures around the world have come together in a perfect storm that is causing significant volatility and uncertainty in commodity markets in general“.
Secondly, the intense flight to the safe haven is helping the dollar to outperform their rivals. Following Monday’s turmoil, the dollar index turned higher on Tuesday and rose to its highest level in nearly two decades at 106.50, up 1.3% on the day. Major US equity indices are now down between 1.5% and 2%, reflecting the gloomy mood of the market.
Meanwhile, data from the US has revealed that factory orders rose 1.6% in May, beating market expectations for a 0.5% rise.
USD/CAD technical levels
Source: Fx Street
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