- Crude oil plunges as producers trigger a global price war.
- WTI stages a technical rebound after dropping to $27.30 on Monday.
- US Dollar Index erases 1% amid plummeting US T-bond yields.
The USD/CAD pair surged at the start of the week and touched its highest level since May 2017 at 1.3758 as plummeting crude oil prices weighed heavily on the commodity-sensitive CAD. With crude oil prices staging a technical rebound during the European trading hours, the pair pulled away from its tops but found support at 1.3570. As of writing, USD/CAD was trading near 1.3650, adding 1.7% on a daily basis.
WTI crashes, USD continues to weaken against its peers
After failing to reach an agreement on oil production cuts with Russia on Friday, Saudi Arabia slashed its export oil prices to start a global price war. With the initial reaction, the barrel of West Texas Intermediate fell to $27.30 before retracing a portion of its sharp fall. At the moment, the WTI is trading at $32.20, still down more than 20% on a daily basis.
Commenting on this development, “due to the drop in global oil demand, in combination with the existing and most likely even rising oversupply, oil prices will continue to trade lower, and for longer,” said ABN AMRO senior energy economist Hans van Cleef. “In line with our downward revisions of economic growth forecasts, global oil demand will only modestly recover during the second half of 2020.”
In the meantime, the US Dollar Index (DXY) extended its slide as markets hit the panic button and caused the 10-year US Treasury bond yield to fall to a fresh record low of 0.36%. With the DXY erasing nearly 1% and struggling to make a meaningful recovery, the pair’s upside remains limited for now.
There won’t be any macroeconomic data releases from the US or Canada on Monday and markets will remain focused on crude oil prices and Wall Street’s opening bell.
Technical levels to watch for