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USD/CAD: Oil, US Fed and consumer prices on 21.05.2015

21 May 2015

Current trend

On Wednesday, the minutes of the meeting of the US Fed was released. Members of the US FOMC challenged the necessity of the increase in interest rate in June. Now it is expected that the rates will be raised at the next meeting early autumn. Uncertainty of investors and traders continues today. At the beginning of the Asian session the USD has slightly declined.

In addition, during the Asian session preliminary index of purchasing managers (PMI) in the manufacturing sector of China became known. This index rose to 49.1 in May versus the level of 48.9 in April, which indicates improvement in the state of Chinese economy (although its economic growth has been declining latterly). China is of largest oil consumer in the world and its economy has a direct impact on oil price and consequently on the pair USD/CAD.

The rise in the oil prices on Wednesday was caused by the report of the US Ministry of Energy, which says that commercial stock of oil fell by 2.7 million barrels. At the closing session of the New York Mercantile exchange (NYMEX) on Wednesday July futures for the light sweet oil have increased by 1.7% up to 58.98 USD per barrel. Futures for crude oil Brent at the ICE Futures Europe has grown by 1.6% up to 65.03 per barrel.

The weekly news, which is worth of paying attention is consumer price index (CPI) of Canada, which will be released on Friday 15:30 (GMT+3). High level of this index is the sign of the increase in the interest rate and the positive momentum for the CAD. Previous index was at the level of 1.2%. If the new index exceeds this level the Canadian dollar will grow.

Consumer price index of Canada will be released at the same time as the US consumer price index. Volatility in the pair is expected to be high. Be careful when making decisions.

Support and resistance

On the daily chart technically, in the short-term the pair USD/CAD will decline to 1.2050 (ÅÌÀ144), 1.1975 (Fibonacci 38.2%) and 1.1890 (ÅÌÀ200). In the long-term, given market’s expectation of the increase in the interest rate in the USA, and in case of decline in the price of oil, the pair will rise to 1.2500, 1.2600 and the highs of March at 1.2800.

Support levels: 1.2170, 1.2130, 1.2050, 1.1975 and 1.1890

Resistance levels: 1.2240, 1.2290, 1.2425 and 1.2595

Trading tips

It is recommended to open sell positions at the current price level with the targets of 1.2170 and 1.2130. For aggressive positions it is advisable to place BuyStop orders at the price of 1.2240 and take profit of 1.2290. More cautious traders can carry out buy transactions after breakdown of the resistance level of 1.2290 with the target of 1.2425.

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