Loonie Crushed as Oil Prices Tumble on Pandemic Fears

Dan Blystone TradersLog.com

USD/CAD rallied to its highest levels since June of 2019 in early trading on Friday. The Canadian dollar was pressured as crude oil prices fell to their lowest levels in over a year. The Canadian dollar has a positive correlation with crude oil, since it is one of the world’s leading oil producing nations.

The selloff in crude oil was spurred by fears of a coronavirus pandemic that could hinder global economic growth and in turn reduce demand. China and the United States are the world’s largest oil consumers. Earlier in February, the International Energy Agency said that it expects global oil demand will fall in the first quarter of 2020 - which would mark its first quarterly contraction in over 10 years.

On Wednesday, the number of new coronavirus infections in China was exceeded by new cases abroad, underscoring the danger of the outbreak becoming a pandemic. Over 83,000 people in at least 53 countries have been infected, and more than 2,800 have lost their lives. The vast majority of cases have been in China so far.

On Thursday, Tedros Adhanom Ghebreyesus, the director general of the World Health Organization (WHO) said: “This virus has pandemic potential”. He also warned; “we are actually in a very delicate situation in which the outbreak can go in any direction based on how we handle it.”

European markets sank in early trading on Friday, following Thursday’s bloodbath in US stocks, with the Dow closing 1,190 points lower. US stock index futures currently point to a lower open. Meanwhile the safe haven Japanese yen and Swiss franc are trading sharply higher.

Looking at the USD/CAD monthly chart we can see that a pennant pattern has formed and that price is currently pressed against the upper trendline. A break above will bring the prior high of 1.3664 into view for the bulls.

Author

Dan Blystone

TradersLog.com

Experience Dan Blystone began his career in the trading industry in 1998. He worked as an arb clerk on the floor of the Chicago Mercantile Exchange (CME), flashing orders into the currency futures pits.

EUR/USD looks weak below 1.1800

EUR/USD has slipped back under pressure, breaking through the 1.1800 support and drifting towards the weekly lows near 1.1770 ahead of the opening bell in Asia. The move reflects renewed strength in the US Dollar, with steady geopolitical tensions keeping its demand firm. Moving forward, the release of the German labour market report and flash inflation figures should keep European investors entertained on Friday.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold remains below $5,200 despite tariff jitters and geopolitical risks

Gold is seen consolidating in a range below the $5,200 mark during the Asian session on Friday amid mixed cues. Trade jitters, along with the risk of a potential US-Iran war, act as a tailwind for the safe-haven bullion. Meanwhile, the Fed's hawkish outlook keeps the US Dollar close to the monthly high and caps the non-yielding yellow metal. Nevertheless, the commodity remains on track to register gains for the fourth straight week, though the fundamental backdrop warrants some caution for bullish traders.