Market Analysis

USD/CAD Stays Under Pressure as Oil Prices Rally, Maintains Position Above 1.3500 Level

Amos Simanungkalit · 01 Apr 20245.4K Views

The USD/CAD pair continues its retreat from the 1.3610-1.3615 resistance area, marking the year-to-date peak, as it faces persistent selling pressure for the sixth consecutive day on Monday. However, the decline halts just before reaching the key psychological level of 1.3500, prompting a slight rebound from the one-week low recorded during Asian trading hours.

Crude oil prices surge to their highest level in five months amid concerns over tightening global supply. This surge is fueled by OPEC+ production cuts, attacks on Russian refineries, and encouraging Chinese manufacturing data.

Consequently, the Canadian dollar, which is closely tied to commodity prices, gains strength, while the modest weakness in the US dollar also contributes to downward pressure on the USD/CAD pair. OPEC+ has committed to extending production cuts until the end of June.

Additionally, Russian Deputy Prime Minister Alexander Novak stated on Friday that Russian oil companies will prioritize reducing output over exports in the second quarter.

Furthermore, drone attacks on Russian refineries by Ukrainian forces are expected to disrupt Russia's oil exports. Positive signs of increased fuel demand are also seen with China reporting a rise in manufacturing activity for the first time in six months.

Meanwhile, the US dollar struggles to attract buyers amidst expectations of the Federal Reserve initiating a rate-cutting cycle in June. This sentiment is reinforced by the absence of significant surprises from the US Personal Consumption Expenditures (PCE) Price Index released on Friday.

The prevailing risk-on sentiment in the market further weighs on the safe-haven US dollar, adding to the downward pressure on the USD/CAD pair.

Traders are now awaiting the release of the US ISM Manufacturing PMI for potential market movement, followed by the Bank of Canada (BoC) Business Outlook Survey.

Short-term trading opportunities around the USD/CAD pair are expected to be influenced by these factors, in addition to oil price dynamics. However, attention will remain focused on the highly anticipated monthly employment reports from both the US and Canada, scheduled for release on Friday.