The strengthening momentum of the Canadian dollar began to fade again following the latest report on the development of the crude oil market which made oil prices decline again.
This was driven by Saudi Arabia’s decision to be prepared to increase its oil production after the Western oil embargo crisis on Russia.
The situation, which is seen to reduce oil supply pressures, has pushed oil prices back down from previous increases.
As a result, the price on the USD/CAD chart has started to flatten due to the Canadian dollar losing momentum earlier while the US dollar has started to show strength again in the market this week.
However, the strengthening of the US dollar is seen as less dominant over the Loonie against other major currencies in the market.
This is due to central bank fundamental factors where the Bank of Canada (BOC) at yesterday’s policy meeting met expectations to raise interest rates to 1.50%, continuing the aggressive rate hike as before.
Although positive for the Canadian dollar, crude oil market sentiment restrained the currency's further growth.
The decline on the USD/CAD chart has reached the 1.26000 zone this week, however it started to flatten above that zone and gave an early signal for a trend change.
The price increase above the support level of the Moving Average 50 (MA50) on the 1 -hour time frame has been noted by investors for indications that the bullish trend movement is likely to begin.
The initial price increase is seen to go to the zone around 1.27500 first before the continued rise will test the SBR (support become resistance) zone at 1.29000.
On the other hand if the price shows a signal to resume the decline, the support zone at 1.26000 will be tested and try to be broken.
Passing that important zone will then strengthen investors ’expectations for prices to continue the lower decline continuing the previous bearish trend.
The target for further price declines is heading to the focus zone at around 1.25000.
The United States (US) NFP employment data report will be in focus first this week before the Canadian employment data report will be scrutinized next week.
