USD/CAD Hesitating Below 1.40 As Risk Trades and Crude Oil Stall
Skerdian Meta • 2 min read
USD/CAD has been bullish for two years, as the sentiment remained mostly negative since early 2021, keeping commodity dollars down and the USD up. Although buyers hesitated to push the price above 1.40 in October and the price retreated lower as the FED softened the rhetoric and slowed with rate hikes. This pair fell to 1.32 lows, where it formed a support zone, which was helped by the 200 SMA (purple) last month, holding the price twice.
USD/CAD bounced off that moving average last month, as the USD resumed the large uptrend. But, buyers hesitated again to push the price to 1.40 and we saw a retreat earlier this week after a doji candlestick at the top, which is a bearish reversing signal after the bullish momentum.
But we saw some more bullish momentum on Wednesday due to weakness in crude Oil. USD/CAD reached the 1.3800 resistance level, but faced downward pressure due to falling Oil prices. This was sparked by rumors about Credit Suisse bank, which were seen as a potential contagion effect from SNB bank financial troubles. There were concerns that Credit Suisse might be the next to face liquidity problems, but these allegations were denied by the bank’s CEO. However, the Swiss banking regulator SNB stepped in and promised to provide liquidity solutions if needed.
The risk deterioration caused a sell-off in risk assets, with Oil prices being hit the hardest. The price of WTI slipped below $66, causing panic among investors. Falling Oil prices are seen as a signal that there may be problems with rising borrowing costs, as financial systems begin to show cracks.
But buyers failed to push to 1.40 and yesterday markets calmed down. The price retreated lower but there was no direction as traders were waiting to see if the banking crisis will persist. We are following the price action and might open a buy USD/CAD signal, while remaining bearish on crude Oil, with two winning sell Oil signals.