In this article, we will look at the outlook for two currencies against the USD which are correlated with crude oil the CAD, and the NOK. In terms of crude oil, it’s been a big bull run to the upside but we are looking for a reversal in crude oil to potentially send the USD higher on both the Norwegian Krona and Canadian Dollar. Analysis of crude oil, USD/CAD, and USD/NOK below.
Crude oil since its November low has risen by over 45% is this based on the true supply and demand picture? No, it’s driven mostly by speculative buying. In excess of 70% of volatility in crude oil is driven by speculators and they have bought crude oil due to general optimism about a V-shaped global recovery. There is no tightness in supply (the world is awash with oil) and strong demand going forward is discounted. We think we could see a major reversal in crude which is of course bearish for the petro-currencies…
CRUDE OIL DAILY CHART: We are looking for rallies to fail to chart highs and a break of the 52.00 level to trigger a correction to the downside as speculators exit on stop.
USD/CAD DAILY CHART: Last week we made a new daily low then reversed strongly up from the 1.2600 level – we are now trading in low volatility below the 1.2800 level – If we break above the level through 1.2830 we could see a major rally to the upside unfold.
USD/NOK DAILY CHART: We have seen the USD move up from chart lows and we are not stalling below the 8.600 level – If we breakout above the level and above yesterday’s high we would expect a major rally to the upside.
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