Oil Rally Fuels CAD Gains, Pressuring USD/CAD
The Canadian dollar has been gaining strength due to higher crude oil prices, which is exerting upward pressure on USD/CAD. This correlation between oil and the loonie is driven by Canada's status as one of the world's largest oil exporters, where a rise in oil prices boosts export revenues and supports the currency.
The recent surge in WTI crude to near multi-week highs has pushed the pair below the 1.3600 handle, a level that had been a strong support zone earlier this month. The upward momentum is expected to continue as long as oil stays bid, with potential resistance at 1.3650 and key support at 1.3500.
The Bank of Canada's hawkish stance has also contributed to the CAD's gains, with policymakers signaling higher interest rates may stay in place to combat inflation. This contrasts with the Federal Reserve's more cautious tone, which is keeping the U.S. dollar under pressure across the board.