Rising Energy Prices and Central Bank Signals Push CAD Higher

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar         1.3440-1.3690

Euro                 1.5820-1.6070

Sterling            1.8340-1.8590

WTI Oil (opening level) $104.23

The CAD/USD is opening at 1.3567 ( 0.7371 )

CAD outperformed as the Bank of Canada warned on Wednesday that interest rates could rise, with energy prices remaining higher.

USD/CAD holds a bearish near-term bias as spot remains capped beneath the 20-day Exponential Moving Average at 1.3698 and a Fibonacci-heavy resistance band starting at the 61.8% retracement near 1.3667.

On the downside, the pair could slide towards the March 9 low of 1.3525 and the swing low at 1.3482 if it fails to hold the 78.6% Fibonacci retracement at 1.3585.

On the topside, a recovery would first face resistance at the 61.8% retracement at 1.3667, followed by the 20-day EMA at 1.3698 and the 50% retracement near 1.3725; only a sustained break above this cluster would ease the current bearish tone and open the way toward higher retracement barriers at 1.3782 and 1.3853.

Headlines

• Its day 63 of the paused Middle East war and day 24 of the ceasefire and global energy prices continue to rise amid concerns the Strait of Hormuz may not reopen anytime soon. There are limited signs of a US-Iran deal, as the US doubled down on a blockade and Iran’s new supreme leader Mojtaba Khamenei cast doubt on the likelihood of a deal, giving a rare statement in which he vowed not to give up the country’s nuclear or missile technologies. He also signalled Tehran would keep control of the Strait of Hormuz.
• The European Central Bank and Bank of England are considering interest-rate hikes as soon as June to address inflation triggered by the Middle East conflict. ECB’s Lagarde suggested that euro-zone rate-setters will consider a hike at their June meeting after debating whether to make a move. The BOE voted to leave rates unchanged, but several policymakers suggested they are entertaining the idea of backing a rate rise soon.
• The yen surged after Japan intervened in the FX market, following a “final” warning from officials against further selling of the currency. The move was in line with G7 guidelines, which allow action when markets become excessively volatile, with US officials notified ahead of the intervention. Focus now turns to whether the US may join Japan in supporting the yen - a move that would send a much stronger signal to speculators. 

Key Points

• Equities: US and Europe rallied on earnings relief, Asia was holiday-thinned, with Japan and Australia firmer while China and Hong Kong closed.
• Fixed Income: Yields dipped Thursday as crude oil prices corrected lower and after key central bank meetings.
• Currencies: The Japanese yen spiked sharply higher on explicit and stern intervention threats from Japan’s ministry of finance
• Commodities: Broad April gains as 63-day paused war lifts commodities across sectors