USD/CAD inter-markets: focus remains on oil

USD/CAD is coming down to test the 1.3200 key support at the beginning of the week, now reverting two consecutive sessions with gains and shedding around a cent since last week’s peaks just above the 1.3300 handle.

The ongoing USD rally has been almost the exclusive driver behind the recent upside in spot, although today’s surge in crude oil prices following Russia’s intentions to collaborate with the recently OPEC deal to limit oil output has lent extra legs to CAD.

Fed Funds futures prices point to a probability of above 67% of a rate hike by the Federal Reserve at its December meeting, sustaining the upside momentum in the dollar and propelling the US Dollar Index back to the vicinity of recent fresh 3-month highs above 97.00 the figure.

All in all, crude oil dynamics still remain crucial for the pair despite last week’s attempt to decoupling and shifting the focus on US-CA 2-year yields spread differential. On the way up, recent highs above 1.3300 the figure emerges as the interim hurdle, reinforced by the 38.2% Fibo retracement of the 2016 drop. On the opposite side, the 55-day sma at 1.3068 and 100-day sma at 1.3018 offer some initial support ahead of the more relevant 5-month support line around 1.2910.