A commodity currency is a name given to currencies of countries which depend on the export of certain raw materials for income. The major currencies that are considered “commodity currencies” are the Australian dollar, Canadian dollar, and New Zealand dollar.
The level of inventories influences the price of oil. If oil supply increases, it implies over production or weaker demand and is bearish for crude prices. The same can be said if oil supply decreases, it implies supply can’t keep up with demand which is bullish for crude prices.
Take the event that happened Sunday night. Drones struck a key Saudi Arabian oil facility, disrupting 5% of the daily global oil supply. The USD/CAD pair shout down as oil prices increased double digits on Monday. But today was a different story. Saudi Arabia’s told the financial press that oil output was expected to return to normal levels in the next two-three weeks, which was much faster than initially expected. As a result, oil fell almost 5% and the USD/CAD gained on the news.
So where is the USD/CAD headed next, lets go to the charts to find out?
Monthly Chart (Curve Time Frame) – the monthly supply is 1.36500 and the monthly demand is 1.24000.
Weekly Chart (Trend Time Frame) – price is now sideways after breaking the uptrend line and forming a lower low.
Daily Chart (Entry Time Frame) – there is no set-up at this time, but a potential shorting opportunity might present itself if price can take out the LL, then pull back.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.