Today's Move In WTI Crude Could Mean Trouble For The Canadian Dollar

Crude broke out above the downward sloping trendline of a triangle today. However, it also closed down 0.28% on the day. After breaking out, Crude turned lower on the day and moved back into the triangle, in negative territory for the day. This candlestick is a doji candle and is considered to be a candle of indecision.

(Click on image to enlarge)

Source: Tradingview.

In contrast, USD/CAD continued its moved lower today (CAD higher) from the bearish engulfing candle put in last week. The pair is hovering around the 61.8% retracement level near 1.3148 from the July 19th lows to the September 3rd highs. Trendline support comes in roughly 50 pips lower near 1.3100.

(Click on image to enlarge)

Source: Tradingview,

Crude and CAD typically move together, that is, when crude trades lower, USD/CAD trades higher (CAD lower). However, today, as Crude reversed lower, CAD did not. To better illustrate this, below is a chart of WTI Crude and Canadian Dollar Futures (the futures trade in the same direction as Crude, as opposed to USD/CAD which trades inversely to crude). The correlation coefficient for the two assets is currently +.62.

(Click on image to enlarge)

Source: Tradingview,

What happens tomorrow if Crude reverses its recent move higher and trades lower back into the triangle? The Canadian Dollar may trade lower with it (USD/CAD trade higher).On a 240-minute chart, price is diverging from the RSI, which is typically a signal of a potential reversal. Horizontal resistance and Fibonacci retracements come in between 1.3230 and 1.3260. As mentioned in the daily chart, support is near 1.3100.

(Click on image to enlarge)

Source: Tradingview,

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Moon Kil Woong 2 months ago Contributor's comment

Oil prices are stabilizing and may rise on Saudi statements and as people realize that big oil is no longer looking to drill new areas as much as acquire floundering small oil companies pumping at losses only to pay for their massive debt load.

Beating Buffett 2 months ago Member's comment


Mike Faragut 2 months ago Member's comment

Thanks Moon Kil Woong, what kind of time frame do you think we are looking at for a rise in #oil?

Moon Kil Woong 2 weeks ago Contributor's comment

Sorry for the late reply. I think we are looking for oil to stabilize first. We might see a decent upward trend after Q1 next year. The issue is that oil has slid because they don't see it rising in the near term.

Mike Faragut 6 days ago Member's comment

Thanks for answering my question Mr. Woong.