The uptrend continues and becomes more intense as the coronavirus spreads and its impact on the global economy increases. In these conditions, investors are selling off commodity currencies in favor of safe assets. This week, the rates reached the highest level in the last 5 years, taking into account the collapse of oil prices, which is a very important factor for the Canadian dollar.
Oil prices on Monday fell by 25%, which was the strongest drop in the past 12 years. The reason was the conflict between OPEC and Russia in terms of reducing oil extraction. In addition, the closure of the US borders for 30 days put even more pressure on air travel and fuel demand. All this has certainly affected the value of the Canadian dollar. At the same time, there is no perspective of a significant recovery in oil prices. In the absence of incentives for growth and improvement of the situation with the virus, oil may remain in the range of 30-35 dollars per barrel for a long time, which will certainly not support the CAD, given that the cost of American oil extraction is much lower than for Saudi Arabia, for example.
As for the USD, the US currency is quite resistant to the negative impact of the coronavirus. Nevertheless, there is a deterioration in the economic situation. The probability of a reduction in the Fed's rate next week is estimated at almost 100 percent, which gives us reason to expect a price correction for the USD/CAD pair in the near future. The MACD and Stochastic oscillators indicate the rates in the oversold zone, which also increases the expectations of a price correction. Therefore, we consider the deals to SELL as the most effective in the short term.
