USD/CAD cheap oil – stronger dollar

WTI prices started the week negatively in conditions of growing open interest and volume, allowing the corrective negative side to continue in a very short time. The change in crude oil inventories in the USA amounted to +1.3 million barrels in the week that ended on May 14. The weekly report published by the American Energy Information Administration (EIA) was announced on Wednesday. Analysts estimated the increase at 1.6 million barrels. Weak inventory recovery caused the price of oil to fall to $ 62 a barrel. Which automatically caused the Canadian dollar to weaken against other currencies in the main basket. Following the USD/CAD pair, we see that we have stayed above 1.20000 the last few days and that now the dollar has a chance to erase part of its losses, pushing the value of the pair to higher levels. Also, the rise in US bond yields, the risky mood has provided some support for the safe US dollar.

Data released on Wednesday shows that inflation in Canada for April is higher than expected. According to analysts at the National Bank of Canada, inflation could be more permanent than a transient effect. The increase in April reflected last year’s weakness as much as the current drop in prices. In particular, the main inflation was positively influenced by the growth of gasoline prices of 62.5% in the past 12 months. Data released by Statistics Canada revealed that the main CPI rose to 3.4% in April from 2.2% in the previous month. That was more than the consensus estimate, which indicates a reading of 3.2%. On a monthly basis, the CPI reached 0.5% during the reporting month compared to market expectations for a moderate decline to 0.4%. The data did nothing to provide any significant boost to the Canadian dollar. Investors are reluctant to make any aggressive bets prefer to wait on the sidelines and look forward to the long-awaited FOMC minutes for a new targeted boost.

Technical analysis on the four-hour time frame tells us that the USD/CAD pair has current support for moving averages MA, EMA20, and MA50 and MACD indicators with a pure bullish signal. We now hope that the USD/CAD pair will be able to cross the first Fibonacci level at 23.6% at 1.21600 so that we can move on to higher levels on the chart.