- Oil prices surged on Tuesday following Iran’s missile attacks on Israel.
- Canada’s manufacturing sector experienced its first growth in seventeen months.
- The US dollar strengthened against most currencies due to increased safe-haven demand.
Analysis of USD/CAD indicates a resurgence of bearish momentum as the Canadian dollar appreciates in response to rising oil prices amidst Middle Eastern tensions. Concurrently, the US dollar remains robust as investors flock to safe-haven assets due to geopolitical uncertainty.
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Oil prices rallied on Tuesday following Iran’s missile fire at Israel, which escalated the ongoing conflict in the Middle East. The widening Israel-Gaza war now threatens to expand further, potentially leading to disruptions in oil supply that would result in a tighter market and higher prices.
In addition, the Canadian dollar gained strength because Canada is a net oil exporter. Thus, rising oil prices enhance the country’s revenue and bolster its currency. Positive domestic economic data also supported the loonie, as manufacturing business activity grew for the first time in seventeen months, with the PMI increasing from 49.5 to 50.4, indicating expansion.
Simultaneously, the US dollar advanced against many currencies due to the influx of safe-haven investments. The conflict between Iran and Israel led to a decline in risk appetite, pushing investors toward safer assets. However, as the Canadian dollar was also appreciating, the USD/CAD pair saw a decline.
Furthermore, data from the previous session indicated stable manufacturing activity in the US, along with an increase in job openings, reflecting strong labor demand. The US ISM manufacturing PMI met expectations, remaining steady at 47.2, while the number of job vacancies stood at 8.04 million, exceeding the forecast of 7.64 million.
Market participants are now looking forward to the critical nonfarm payroll report for insights into the prospective Federal Reserve rate cuts.
Key USD/CAD events today
- US ADP Non-Farm Employment Change
USD/CAD Technical Price Analysis: Bears Target 1.3425 Support
From a technical perspective, the price of USD/CAD has fallen below the 30-SMA after facing resistance at the 0.5 Fibonacci level. Although bulls briefly gained control, they could not sustain the price above the SMA. Recently, the price broke out of a bullish channel with a decisive move that paused at the 1.3425 support level.
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If the upcoming bullish movement is merely corrective, bears might initiate another sharp decline. This could lead to the price breaking below the 1.3425 level, resulting in lower lows.
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