USD/CAD, Crude Oil Key Points
- Amidst continuing tensions in the Middle East, the IEA has increased its prediction for oil demand growth in 2024 to 1.24 million barrels per day.
- The WTI Crude Oil price is starting to emerge from its downward trend, but traders may not be confident in predicting further growth due to a significant reversal that occurred on Friday.
- USD/CAD is currently hesitating right under the level of resistance at 1.3540, however, the upward momentum in the short-term continues to favor the buyers.
Crude Oil Fundamental Analysis
Despite the ongoing geopolitical tensions in the important Red Sea corridor, which have caused disruptions in global shipping routes, the crude oil market has not shown any significant price changes this year.
In light of the current situation, the International Energy Agency (IEA) has updated its prediction for oil demand. They now expect a growth of 1.24 million barrels per day (bpd) in 2024, which is 180,000 bpd higher than their previous estimate. This change in forecast is influenced by the ongoing tensions in the Middle East, including the U.S. strikes on Houthi targets in Yemen as a response to attacks on ships, and the strikes by the Iran-aligned Houthis in support of Palestinians.
Furthermore, according to the International Energy Agency’s forecast, the oil market is expected to be stable and well-balanced this year, despite the escalating tensions in the Middle East and the difficulties caused by severe cold weather in the United States. The extreme weather conditions have resulted in disruptions to the production of oil in North Dakota. This prediction is in line with the expectations of the Organization of the Petroleum Producing Countries (OPEC) regarding steady growth in demand. However, OPEC predicts a significantly higher increase in demand of 2.25 million barrels per day for this year.
Crude Oil Technical Analysis – WTI Daily Chart
WTI Crude Oil prices in West Texas are showing a slight positive trend today, but traders may be cautious due to a previous unsuccessful rally on Friday. Despite initially rising from $73 to over $75, the prices ultimately went back down and closed lower.
After a drastic change last week, the ability of the market to bounce back this week is notably commendable. In the future, investors who are optimistic about the market will want to observe if oil prices can surpass the downward market trend, and then monitor if it can surpass the 50-day Exponential Moving Average (EMA) and the previous week’s high around the lower-$75 range. Only then will they feel confident that a long-term turnaround is possibly occurring. On the other hand, if the price of oil drops below $70, it may indicate that the market will continue to decline for several months, potentially reaching the June lows at $67.
Also Read: Euro under pressure as dollar gains ground, EUR/USD could fall below $1.08
Canadian Dollar Technical Analysis – USD/CAD Daily Chart
The Canadian Dollar has traditionally shown a strong connection with oil prices, but when looking at the relationship between the USD and CAD, this connection has been less stable in recent times. From an economic perspective, the decreasing correlation is probably due to the US becoming a powerful player in oil drilling, which results in both currencies being affected by oil price changes.
Regardless, the current increase in crude oil prices may be causing the temporary halt in the rise of USD/CAD. This is also influenced by the 50% Fibonacci retracement level of the drop that occurred between November and December, which stands at 1.3540. However, given that there have been only three relatively minor decreases in the pair so far this year, the short-term momentum remains in favor of the buyers. If the resistance at 1.3540 is surpassed, the next Fibonacci retracement levels at 1.3625 (61.8%) and 1.3745 (78.6%) could be the subsequent targets.
