USDCAD has been torn between the rising dollar index and oil prices. One of Canada’s top exports is oil. Because of that Canadian dollar is highly correlated with oil prices. For the last two years, USDCAD and oil correlation is negative 73.3 percent which means that %53.8 of the USDCAD valuation is linked to oil prices. Lately, however, the balance of USDCAD and Brent shift in favor of USDCAD because of the fast-rising dollar index. This shift may decrease if recession worries increase and oil prices fall. Chinese covid-19 shutdowns, hawkish FED, and Oil stock sales pressuring the prices lately. Despite the negative short-term outlook, USDCAD’s divergence from the regression may stall the upward pressures.
From a technical standpoint, USDCAD is testing a major resistance zone. The 200-day moving average, Fibonacci %38.2 line, and the lower line of the broken uptrend channel are at 1.26-1.2625 area. As long as this resistance zone holds, other downside attempts are on the table. 1.2485 – 1.2373 can be targeted for such attempts.
An upside breakout, however, might lead prices to around 1.27 again.
