USD/CAD surges to 34-month top above 1.3750 as oil plummets to four-year low

• USD/CAD rises to the highest since early-January 2019.
• WTI drops heavily on weekend headlines from Russia and Saudi Arabia signal widening of the demand-supply gap.
• Coronavirus fears weigh on the demand outlook.

USD/CAD takes the bids to 1.3690, up 2.05%, the highest since early May 2017, during the Asian session on Monday. The Loonie pair surged at the week’s start following the weekend headlines from the key oil producers. However, the ongoing coronavirus (COVID-19) fears kept the bulls in power then after.

Given the Canadian economy’s heavy reliance on oil exports, declining WTI will have an inverse impact on the USD/CAD pair. That said, black gold recently dropped to the four-year low around $30.60 amid expectations of widening demand-supply gap following the headlines from Russia and Saudi Arabia.

As if the break of Organization of the Petroleum Exporting Countries (OPEC) in the recent meeting was not enough, Russia announced its intention to not follow the global supply cut accord as COVID-19 takes an increasing toll on the economy. Additionally, Saudi Arabia crossed wires and showed readiness to boost exports.

Meanwhile, the deadly virus continues to spread rapidly in Europe and the US. The latest updates suggest the death toll in Italy rises to 366 from 233 whereas the US plans to stop travel via cruise after the Diamond Princess incident. Fears bloomed after Washington Post circulated the news that some of the White House policymakers anticipate double or more count of the deadly virus in the next 48 hours. It’s worth mentioning that the US Vice President Mike Pence conveyed the lack of testing kits on Friday.

Amid all this, the US 10-year and 30-year treasury yields seesaw near the record lows under 1.0% and 0.50% respectively whereas stocks in Asia are also in the sea of red by the press time.

Looking forward, investors will keep eyes on the coronavirus updates, coupled with oil-related headlines for fresh direction.

Technical Analysis

The year 2017 high near 1.3800 flashes on the bulls’ radar while a pullback below May 2019 top near 1.3565 can trigger fresh selling towards February month high near 1.3465.