June 1, 2021 8:44:05
We wrote last week about the monthly OPEC+ meeting today as the cartel will decide on whether to hike output again. With the global recovery widely expected to gather more pace through the summer, the US Memorial holiday traditionally kicks off the driving season stateside so will add further to the demand side. Even with the increased output plus supply from Iran, the market seems confident that it will be able to absorb this and will be looking for any hints as to what the group will do with supply after July. Any signs that OPEC+ hold output steady for now will likely boost oil and currencies correlated strongly with oil like the CAD.
USD/CAD bearish consolidation
USD/CAD has undergone a healthy pause for breath after breaking through the 1.24 support zone, with prices consolidating around the lows of the move above 1.20. Momentum indicators have eased from oversold conditions and the pair is forming a bearish descending triangle with lower highs and resistance around 1.2142. A break lower will target 1.1930 in the near-term and may need broader dollar weakness in order to break this long-term support conclusively. (Step forward Friday’s NFP and Canada jobs report!) Targets below include the May 2015 low at 1.919.
EUR/CAD bear flag in play
EUR/CAD is also continuing to consolidate in a bearish pattern (and frustrating us when it threatened to roll over a few weeks ago). Lows below 1.46 in mid-May have not been sustained with the cross creeping back to the 1.47s. With the long-term trend pointing to lower prices, any weakness below the base of the flag at 1.47 should see bears push south to the cycle low again and beyond, with the ultimate aim being towards 1.44.
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