Rebound in oil prices is helping to lift the loonie alongside improved risk sentiment
USD/CAD broke above the July high @ 1.3290 in overnight trading after oil prices slumped alongside risk assets. There's a hint of a rebound today with WTI up by 1.8% to $54.40 currently and that's helping to provide some relief for the loonie following yesterday's pressure.
The break of the 1.3290 level is a good platform to build on for buyers to retest the year's high @ 1.3386, close to the 76.4 retracement level where it stalled back in June. But the caveat here is that the break was a result of a shift in risk sentiment and that tends to be the most fickle-minded breaks you can get in markets.
For now, despite the rebound in oil, the loonie is failing to put up any modest gains against the dollar. The pair still only trades in a 37 pips range for the day hovering around 1.3290-00 levels for the most part so far.
The key to trading the pair will be to watch out for how US equities perform later in the day as I reckon that will be the key driver of risk sentiment in markets today (this will in turn affect oil prices as well). Should risk sentiment start to sour again, expect the pair to move back towards the highs and threaten a move towards the June high.
In my view, the upside move still looks more favourable unless price threatens a break below key near-term support levels i.e. 100 and 200-hour moving averages @ 1.3197 and 1.3210 respectively. However, be warned that room for further gains remain limited by the June highs. Only if that breaks will we see an extension towards 1.3500.