USD/CAD inter-markets: it’s all about oil

USD/CAD is reverting recent gains after briefly testing highs in the vicinity of 1.3140 on Monday, although decent support seems to have emerged in the 1.3000 neighbourhood for the time being.

A renewed offered bias around the greenback plus CAD deriving support from the recovery in crude oil prices remain the key drivers behind today’s decline. In fact, the barrel of West Texas Intermediate is gaining more than 2% and approaching the $46.00 mark as of writing.

The demand for CAD is also sustained by swelling risk-on sentiment across the board, reflected by volatility meandering daily lows when tracked by VIX. In addition, Canadian yields remains on the rise, following its US peers.

In the meantime, USD/CAD remains within the rising channel off May/June lows, facing the next relevant hurdle in the 1.3140/1.3200 band, ahead of the 1.3310 area, where sit the key 200-day sma and Fibo retracement of the 2016 down move. On the downside, July’s low at 1.2827 appears as the initial hurdle for sellers.