- The USD/CAD is strengthened as the direct participation of the US in tensions in the Middle East has increased the demand for safe refuge.
- The president of the USA, Trump, confirmed that Washington’s military forces have launched air attacks against Iran.
- The price of oil is expected to benefit from the increase in oil prices.
The USD/CAD pair extends its winning streak for the fifth day of negotiation on Monday. The Loonie Paris wins as the demand for safe refuge assets, such as the US dollar (USD), has increased after direct participation in the United States (USA) in the Air War between Israel and Iran during the weekend.
The dollar index (DXY), which follows the value of the dollar against six main currencies, jumps to about 99.10.
The president of the United States, Donald Trump, declared in a publication in Truth.Social that Washington’s military forces successfully attacked three nuclear facilities of Iran, with the aim of arresting Tehran to fulfill his ambition to build nuclear weapons.
Meanwhile, investors prepare for the retaliation of Iran, who has threatened to close the Ormuz Strait, the entrance door for which almost a quarter of the world’s total oil is supplied.
In the front of the Loonie, the highest prices of oil are expected to strengthen the Canadian dollar (CAD) compared to its other peers, since Canada is the largest oil exporter to the US.
The USD/CAD wins for five consecutive negotiation days after registering a new minimum of eight months around 1,3540 on June 16. The Loonie pair is recovered above the 20 -day exponential (EMA) mobile average, indicating that the short -term trend has become bullish.
The 14 -day relative force index (RSI) abruptly jumps to about 50.00, exhibiting signs of bullish reversal.
An additional recovery movement above the maximum of May 29, 1,3820 by the PAR would open the door to the maximum of May 21, 1,3920, followed by the maximum of May 15, 1.4000.
On the contrary, the asset could slide towards the psychological level of 1,3500 and the minimum of September 25, 1,3420 if it breaks below the minimum of Monday of 1,3540.
USD/CAD DAILY GRAPH
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FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
