USD/CAD fading 1.2900 handle as crude tries to find a floor after recent slide

• Oil is trying to regain some of the lost ground in the past two days as investors digest OPEC comments to maybe ease on the cuts in June.
• USD/CAD is trying to fade the 1.2900 level which has been resistance in the last 8 days. 

The Loonie is back in the upper third of its 8-day trading range fading the 1.2900 handle at the time of writing and up 0.40% on Thursday. 

The oil commodity-linked currency, CAD is taking its cues from the black gold which is trying to put a stop at the recent slide seen in the last two days. OPEC signaled that it might dial back on the current output cuts in order to compensate for Venezuela and Iran potential production drop. The decision will be made in June at the next OPEC meeting in Vienna.

“Brent crude oil has been struggling to break above $80 a barrel despite a deteriorating outlook for production in Venezuela and the not yet quantifiable impact of US sanctions on Iran. A ten-dollar rally since early April could indicate that tighter supply may begin to be priced in. Geopolitical risks are likely to keep a relatively solid floor under the market. But the recent price behavior could indicate the market is getting ready to consolidate with $77.50 a barrel being the first level of support,” says Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Meanwhile, the US Dollar Index (DXY) which measures the buck against a basket of other currencies is on the back foot since Wednesday as the FOMC’s minutes were not as hawkish as investors were anticipating. However, USD remains a strong currency as DXY trades to multi-week-highs while the Federal Reserve Bank is expected to raise rates at the next meeting in June. 

USD/CAD 4-hour chart 

The Loonie is currently fading the 1.2900 level which has been acting as a resistance in the last 8 days. The three main moving averages are flat suggesting that the trend is neutral as the market is in a trading range oscillating between the 1.2900 and 1.2750 levels. Supports are seen at the 1.2823 swing low and at the 1.2750 bottom of the range. On the other hand, bulls need to strongly break above the 1.2900 resistance in order to reach the 1.3000 handle which is the top established on May 8.