Canadian Dollar Falls With Crude Oil Prices, Will USD/CAD Break Higher Next?

USD/CAD, WTI, Global Growth – Canadian Dollar and Oil Briefing:

Loonie Suffering Alongside Crude Oil Prices

The Canadian Dollar underperformed against the US Dollar on Thursday, extending losses that started at the end of last week. USD/CAD is up almost 1 percent this week so far, marking the best week for the currency pair since the beginning of March. What has been driving losses for the Loonie of late?

Look no further than crude oil. WTI is down roughly 7 percent this week so far, marking the worst 5-day period since the middle of March. The commodity has almost filled the upside gap ever since OPEC+ announced surprise cuts amid fading global growth prospects at the end of last month. That caused a surge in WTI as markets started trading after the last weekend of March.

Oil is a key export of Canada, making the economy at times sensitive to swings in its price. Lately, fears of a global growth slowdown have been driving the commodity lower. Yesterday, the Federal Reserve’s beige book showed that policymakers noted that economic activity stalled in recent weeks. Meanwhile, there is a distinct contrast between how China’s economy is being driven by domestic versus external factors.

Earlier this week, Chinese retail sales strongly beat expectations as the economy continued to recover from the zero-Covid regime. But, industrial production fell behind, which is more sensitive to the health of the global economy. As such, it is not too surprising to see USD/CAD climb higher in recent days, tracking the decline in oil prices. Where to for USD/CAD?

Canadian Dollar Technical Analysis

Focusing on the daily chart, USD/CAD is now facing the 20-day Simple Moving Average (SMA). The pair has not tested it since the end of March. This line could maintain the near-term downward focus, pivoting prices back to the rising trendline from November and the 1.3263 – 1.3334 support zone. Otherwise, confirming a breakout above exposes the 1.37 inflection zone.

USD/CAD Daily Chart

Chart Created in TradingView

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX