After a strong sell-off in the last trading week of 2019, the US dollar continued to extend losses against the Canadian dollar in today’s London session.
The US airstrike that killed a top-ranked Iranian military commander has sent shockwaves through the market, pushing gold to the highest level in more than six years and Brent crude to a fresh 7-month high.
Iran said over the weekend that it will abandon the Nuclear Deal that set limits on its enrichment of uranium, while President Trump tweeted the US had 52 Iranian sites on target in case of Iranian retaliation. The S&P 500 and the DJIA were down 0.71% and 0.81% at the time of writing, respectively.
The higher oil prices have supported the Canadian dollar last week that opened with a strong gap on December 30 and continued to perform strongly ahead of the New Year’s eve.
If Iran decides to target oil in its retaliation and disrupt the steady stream of Brent crude passing through the Strait of Hormuz, the Canadian dollar could be poised to further strengthen against the greenback.
While tensions between the US and Iran are expected to dominate the market in the week ahead, it’s worth noting that this week’s highlights also include the US non-farm payrolls and Canadian labour market data which are scheduled for release on Friday.
Technicals show a healthy downtrend in the USD/CAD pair that has started in early 2019, with the pair forming a fresh lower low last Tuesday. The RSI followed the price, signaling that more weakness might be ahead for the pair. Important resistance levels include the lower 1.30s that align with the July 18 low, while bears could face buying pressure at the 1.28 round-number. As of 2:00 p.m. London time, the USD/CAD pair traded at 1.2969, down 0.20% for the day.
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