Monday saw the USD/CAD pair drop off the start but has also seen a bit of a recovery after that. This is a market that continues to be very noisy.
USD/CAD
During trading on Monday, we had seen the US dollar gap higher to kick off the trading session but since then things have cooled off and we have moved back toward the Canadian dollar. That being said, in the middle of the day we find ourselves hanging around the crucial 200-day EMA, basically where we've been for the most part at least over the last 3 days or so.
Given enough time I do think this market turns around and tries to rally but I don't know if that's going to be here or maybe a little closer to the crucial 1.3750 level. This is a market that has been very noisy as of late which does make a certain amount of sense considering there's so much noise around the oil markets.
Oil Logistics and Monetary Policy Impact
It's not necessarily that a lack of oil being pushed through the Strait of Hormuz directly influences this currency pair, but it does strengthen the Canadian dollar worldwide. The United States produces almost 14 million barrels of petroleum a day and for what it's worth the bulk of the world's oil tanker fleet is now steaming toward the Gulf of Mexico as the Strait of Hormuz is being closed by the US Navy.
This is an interesting turn of events, and we'll have to see how this plays out. It should at least in theory drive up oil prices eventually or perhaps more abundantly seen the price of petrol at the pump. The US dollar still has a higher interest rate than the Canadian dollar although it did cool off a little bit later in the day so that explains part of the pullback.
I am a proponent of buying this pair in general, but we need to see a little bit of momentum return. If we were to break down below the 1.37 level that could change things, but I don't see that happening very easily here. To the upside the 1.40 level is a definitive target as far as I can tell but it may take some time to reach.