The loonies or Canadian dollar was the worst performing currency on the stock market in the last 24 hours. The price of the Canadian dollar has long been tied to one of Canada’s primary exports, i.e. oil.
The crude oil price and the price of its derivatives like WTI tumbled further on Tuesday, 2nd May. The WTI slid 5.6% marking its worst performance in 24 hours since 24th July 2022
The markets stayed risk-averse on Tuesday as the VIX ‘fear gauge’ rose by 10% across the markets. Traders scrambled for safety as Nasdaq 100, S&P 500 and Dow Jones fell -0.92%, -1.17% and -1.11%, respectively.
Oil exports have always factored in Canada’s economic policies and the price of oil is considered indicative of Canada’s economic prospects. Hence, the price of oil had a major impact on the way the Canadian dollar was traded. The price of oil was not the only factor that affected the price of the loonie. The slowdown and looming recession in the American economy was another big factor. The USA continues to be one of Canada’s key trading partners.
The Asia-Pacific markets might also tumble as investors nervously await the Fed's announcement about the interest rate. This could lead to a further slide in the price of oil and the loonie. However, it could make USD/CAD stronger.
The Fed will make its decision in the next 24 hours, the markets will continue to be ‘nervous’ till then.
Technical Analysis
There are some signs that USD/CAD might break out soon. The USD/CAD has been higher on a near-term falling trendline since March. The prices have also remained above the 20 days Simple Moving Average. If the pair moves higher it will be exposed to the 1.3833 – 1.3862 resistance zone. However, if the resistance succeeds and the pair fails to break out, the focus will then shift to the 1.3263 – 1.3334 range.
