The Canadian dollar is expected to receive a positive impact on trading this week following developments in the global crude oil market that have jolted the market.
The value of the black gold commodity soared at the end of last week after the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) announced measures to reduce oil production.
A cut of up to 1.16 million barrels per day involves Russia, Saudi Arabia, the UAE, Kuwait and several other countries that have voluntarily agreed to jointly reduce production.
The reduction in supply will push up the price of oil, and this will also make the value of the Canadian dollar rise as the commodity is Canada's main export.
This situation is also seen to encourage a pattern of price declines that will continue on the chart of the USD/CAD currency pair.
If observed, over the past week the price has made a decline until the beginning of this week reaching the concentration zone at 1.35000.
The factor that also drives the movement situation is the continued decline of the US dollar until it strengthened slightly at the close of trading last week.
The trend remains bearish with the price movement still below the Moving Average 50 (MA50) barrier level on the 1-hour time frame on the USD/CAD chart.
Although the Canadian dollar is expected to strengthen, but the price shows an increase in trading in the Asian session this morning (Monday) testing the MA50 following the opening of the European session.
If the MA50 barrier fails to be crossed and the Canadian dollar starts to strengthen in the next session, the price is seen to continue its decline below the 1.35000 zone.
A further drop in price will head towards around 1.34000 to record a recent 7-week low.
But if the price surges higher and breaks through the MA50 barrier, be alert for early indications of a bullish trend reversal about to begin.
The increase will lead to a level around 1.36500-1.36800 which forms the SBR (support becomes resistance) zone for the price to test it.
Next, resistance at the height of 1.3800 will be the next target if the bullish pattern is successfully maintained.
Apart from the crude oil market, the focus will be on the Canadian jobs data report and the US NFP at the end of the week which will influence the movement of the two currencies.
