The
US dollar picked up support against the Canadian dollar on Tuesday as risk
sentiment remained somewhat mixed on the US-Iran situation.
Gold
fluctuated, heading for a close higher, while Brent crude was paring gains for
the second day with the opening of the New York session.
This
signals that Iran fears remain somewhat elevated as markets are still awaiting
Iran’s response to the US airstrike killing Qassem Soleimani.
Rising
tensions and a possible escalation of conflicts in the Middle East could push
the price of Brent crude higher, which would also be beneficial for the
Canadian dollar.
Another
concern for markets includes the Strait of Hormuz, which ships a large portion
of the global oil supply from the Gulf countries. Conflict in the region could
hinder the flow of oil through that waterway and push its price significantly
higher.
Regarding
market reports, both the US and Canada published their trade balances for
November. The Canadian trade balance came in at -$1.1 billion, missing market
expectations of a $0.8 billion fall and weighing on the currency with the New
York open.
In
the US, the trade balance in November recorded a deficit of $43.1 billion,
beating forecasts that were set at $44.5 billion.
Another
highlight includes the ISM non-manufacturing PMI which is scheduled for release
at 3:00 p.m. London time. Market expectations are set at 54.5, up from last
month’s reading of 53.9.
From
a technical standpoint, the USD/CAD pair found support right at the lower line
of a falling channel, printing a strong bullish candle in today’s trade.
While
the recent down-turn looks overstretched, US-Iran tensions will likely dominate
the performance of the pair in the days ahead. So far, the December 31 low of
1.2951 remains a solid support level for the pair.
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