September 27, 2021 14:01:52
While the Evergrande story rumbles on with no definitive solution as yet, rising energy prices are grabbing the headlines. Rising gas prices are up over 7% today. Crude oil enjoyed a third week of gains last week and is rising for a fifth straight day. Brent is making near three-year highs above the July top at $77.82 amid acute supply/demand imbalances.
Even though the loonie is pretty flat today versus the dollar, it is outperforming most of its peers. CAD is highly correlated to oil prices and an unwinding of political risk premium after the election is also helping.
Risk sentiment is positive today, but energy shortages mean the backdrop remains fragile. This could give a bid to the greenback, especially if Fed speakers this week reinforce market expectations of an imminent taper.
USD/CAD held up by trendline support
After spiking higher to 1.2896 last Monday, the major again failed to sustain its move above 1.28. Gains were short-lived and corrected quickly once more with prices moving back below 1.27.
The 50-day SMA at 1.2614 acts as initial support. This tallies with the bullish trendline from the June lows. A break here opens a route to a test of 1.25 where the 200-day SMA sits at 1.2520. Resistance above is the 1.27 zone followed by the mid-1.27s.
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