USD/CAD bulls seeking significant rally despite WTI breaking $70bbls
|- WTI marches on to break $70bbls and supports CAD.
- Forex vol hit its lowest since February last year.
- With the BoC, ECB and US CPI this week, then the US Federal Reserve meeting, next week, currencies are treading water.
USD/CAD is a touch higher in the North American session at 1.2105, 0.20% higher but knocked back a touch as WTI perks up to take out $70bbls for the first time in more than two years.
Improving demand for oil, one of Canada's biggest export markets, comes as the pandemic continues waning in North America and Europe while outbreaks in India and elsewhere in Asia are being brought under control.
Nevertheless, USD/CAD has been rising in a range of between 1.2071 and 1.2117.
However, it has been painfully slow in recent days in the currency market.
Volatility on Tuesday now falling to its lowest since before the COVID-19 pandemic roiled markets in March 2020.
Investors sat on the sidelines waiting for clearer signals on the inflation trajectory and how central banks will respond.
This week is especially crucial with an impending European Central Bank meeting on Thursday and US inflation data due the same day making for a Super Thursday.
Before then, we get the Bank of Canada that will provide the highlight of a domestically quiet week.
If there are no fireworks in Wednesday's policy statement, traders will be looking to BoC's Lane in an Economic Progress Report on Thursday for a potential catalyst instead.
From a positioning standpoint, net speculators’ long CAD positions recovered to their highest levels since Nov 2019 as the market maintains a reasonably hawkish road map for the BoC, analysts at Rabobank said.
Forex vol at yearly lows
Meanwhile, range-bound currency markets mean a fall in volatility.
The Deutsche Bank Currency Volatility Index, DBVIX, hit its lowest since February last year.
Looking forward, with respect to the US dollar, the June 16 Federal Open Market Committee meeting will be under the spotlight where the Fed would be expected to say that substantial progress towards its goals has not been achieved.
Beyond there, the key dates to watch for ahead are FOMC meetings July 27-28 and September 21-22, along with the Jackson Hole Symposium August 26-28.
USD/CAD technical analysis
As per the prior analysis, USD/CAD Price Analysis: Bulls looking for an upside breakout, sellers have indeed given way and the bias is to the upside.
Prior daily chart analysis
''The daily chart shows that the price has corrected last week to what is expected to hold as a support area with the 61.8% aligned with the prior resistance looking left.
An upside breakout will be on the cards at this juncture so long as support holds.''
Prior hourly chart analysis
Live market analysis, daily and hourly chart
The price has moved higher to test the 21-day EMA. A break there opens risk of a bullish extension out of the accumulation zone.
The hourly chart shows prospects for an upside extension from the 38.2% Fiboi retracement area.
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