West Texas Intermediate had returned to nearly $20 by the close on Friday but could not break above that level which, before mid-April, had marked an 18-year bottom in the commodity. For the Canadian economy, the prospect of low energy prices for a prolonged period of weak demand while the global economy recovers from the pandemic is a daunting one for its domestic employment and export earnings.
Canadian gross domestic product was flat in February down from 0.2% in January. The industrial product price index which tracks major commodity prices fell 0.9% in March and though it was just over half the -1.7% forecast it was the third negative month in a row. The raw materials price index which measures the price paid by Canadian manufacturers was down 15.6% in March also its third straight decline. Markit’s manufacturing PMI for April came in at 33, far below the 41.6 scores in March.
In the gradual retreat of the risk aversion trade last week, the US dollar lost to all the majors (euro, sterling, yen, Aussie, and loonie) but the shift versus the Canadian was minimal opening the week at 1.4103 and closing at 1.4089.
The run higher on Thursday and Friday higher was the product of two technical breaks. First was the move through the downtrend line on the hourly charts that extended back to April 21. This brought the USD/CAD to resistance at 1.4040 where it lingered until just before the London close.
CAD/CHF LONG (Buy)
ENTER AT: 0.682000