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USD/CAD almost flat on broad US dollar recovery and surge in oil

USD/CAD has closed the European session around 1.2563, up by almost 0.05% on a broad recovery in the US dollar and a surge in oil to two weeks high, positive for commodity currencies like the CAD. The overall trading range was extremely narrow on Monday, as both markets, the US and Canada were shut on the day for a public holiday.

The USD was boosted on Friday by short covering, recovering from a15 months low after Japanese government said that it is watching Yen´s move with “greater” sense of concern and is ready to act when actually needed. Also, overall US economic data was upbeat on the weekend.

On the other side, on Friday, the CAD was under stress on muted Canadian economic data coupled with some dovish talks from BOC.

BOC (Bank of Canada) sounds somewhat dovish last week. BOC’s Schembri commented that he BOC may take a cautious approach to interest rate hikes amid subdued Canadian economic activity, high household debt levels, muted wage growth, and tepid inflationary pressure.

On Monday, the CAD got a boost on higher oil amid OPEC´s jawboning and renewed geopolitical tensions in the Middle East and thus closed almost flat against the USD, despite greenback rallied against other non-commodity currencies.

Technically for USD/CAD, the area of 1.2447 is now a vital support and it needs to sustain above 1.2590 for an advance to the 1.2710 zone in the coming days; sustaining below 1.2447, the area of 1.2249 may be visible in the near term.

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Last week, we highlighted how USD/CAD saw a momentary bout of weakness (loonie strength) after the Bank of Canada raised interest rates before reversing sharply back to the topside as oil prices collapsed (see USD/CAD sees an 80-pip roundtrip as traders weigh BOC rate hike vs. oil weakness).

Looking at the last week’s worth of price action, oil prices have remained under pressure (today’s bounce notwithstanding), and USD/CAD has accordingly continued to strengthen. Looking at the chart, the North American pair went on to form a “bullish engulfing candle” off trend line support last Wednesday, with similar patterns forming on Tuesday and (so far) today. These candles show a big shift from selling to buying pressure and signal that bulls remain eager to join the trend on any brief dips. See more in in different website
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