Crude Oil Price Stability Gives Room For USD/CAD Selloff - Can It Last?

The relaxation of tensions between the world’s two largest economies around the US-China trade war has been a bonafide bullish catalyst for global financial markets. As investors have shifted away from their safe haven preferences and moved into higher-yielding and high beta currencies, the commodity currencies have been able to claw back some of their precipitous losses that accumulated during August.

For the Canadian Dollar, the tailwinds are a bit stronger than its Australian and New Zealand Dollar counterparts thanks to a much stronger than expected August Canada jobs report. Now that the US-China trade war back in a state of détente, the correlation between Fed rate cuts and global growth concerns have eased off; in August, what was good for the USDCAD was bad for crude oil prices.

A further de-escalation of the US-China trade war may allow the typical historical relationship – crude oil up, USDCAD down – to be restored, if only temporarily.

CRUDE OIL TECHNICAL ANALYSIS: WEEKLY PRICE CHART (JANUARY 2016 TO SEPTEMBER 2019) (CHART 1)

(Click on image to enlarge)

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A fresh assessment of the weekly chart suggests that crude oil prices are mired in two long-term patterns of neutrality: since the start of May 2019, a descending triangle; and since the end of September 2018, a symmetrical triangle. Crude oil prices are hovering just below the weekly 13-EMA (one-quarter moving average). Meanwhile, weekly MACD and Slow Stochastics are in bearish territory but continue to drift higher. More patience is needed before a decisive break can be called.

CRUDE OIL TECHNICAL ANALYSIS: DAILY PRICE CHART (AUGUST 2018 TO SEPTEMBER 2019) (CHART 2)

(Click on image to enlarge)

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In our last crude oil technical forecast update, it was noted that “momentum in crude oil prices is flat at present time…that there is a lack of agreement among the technical indicators is clear; if crude oil prices are enduring another false breakout attempt, a ‘return into the symmetrical triangle’ may be judged upon a return back above the daily 21-EMA, currently 55.14.”

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