Receding concerns about COVID-19 boosted Oil and CAD prices

A risk-on backdrop, amid receding concerns about the coronavirus outbreak, has boosted the Dollar bloc currencies and Oil prices, which is a particular boon for the Canadian currency.

Nevertheless in the long term, the Dollar, underpinned by the relative robustness of the US economy, continues to register as the strongest main currency on the year-to-date, with gains of around 4% versus the antipodeans.

USDCAD fell to a six-day low at 1.3260, extending a correction from the 4-month peak that was seen on Monday at 1.3329. If the risk appetite continues to pick up in global markets and concerns about the impact of the coronavirus outbreak recede, this could help Loonie to further extend its correction from the key 1.3300-1.3350 Resistance, as a result of crude prices performance. However this is a reversal that still needs further confirmation.

Meanwhile, positive momentum has faded slightly, with RSI turning below 70 while Stochastic has posted a bearish cross, however it is still sloping above 80 (not yet a confirmed bearish momentum). MACD, in contrast, retains upside potential in the medium term. Next key Support for the pair stands at 1.3222 (200-day SMA). A decisive move below it could generate fresh negative bias and could open the 1.3100 area.

However bear in mind that Crude and the factors influencing it remain the key catalysts for Canadian Dollar exchange rates.

Meanwhile, front-month WTI crude prices have rallied by more than 2% as of the early London session, sustaining the $50.00 key bottom and forming a double bottom formation in the $49.30- $49.45 area. This however does not change the strong negative outlook of USOIL in the medium term.
That said, Bollinger Bands extending its decline despite the 8-day consolidation, and all three daily SMA (20-, 50-, 200-) continuing their southwards slope, contribute to a bearish outlook. Momentum indicators comply with the overall picture, with the RSI and Stochastic consolidating around the oversold barrier, whilst MACD concurred with its signal line in the negative territory. Therefore a move above $53.00 (23% Fib. retracement from 65.63 downleg) would endorse a prime sign for further advance.

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Andria Pichidi

Market Analyst

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