In his first public appearance, the new Federal Reserve Chairman Jerome Powell, yesterday hinted that the Fed could raise interest rates more quickly this year, as the U.S. economy grows along with a pickup in inflation and wages. The U.S Dollar surged to the upside in reaction to these hawkish comments. The stronger U.S Dollar, coupled with a sharp retracement in crude oil prices led to a strong upside move in the commodity-linked Loonie (USDCAD).
US WTI Oil
Crude oil prices declined amid concerns of a slowdown in the global economy, as China reported on Wednesday that growth in factory activity in February was at its lowest since July 2016. Moreover, the American Petroleum Institute (API) report on Tuesday showed a U.S. crude build of 933,000 barrels for the week. Inventory data from the U.S. Energy Information Administration (EIA) is due out later on Wednesday and should be watched for further clues.
In the daily timeframe, the recovery in WTI stalled at trend line resistance and is trading below the 63.0 handle. A break of the rising wedge and drop through support at 62.50 would lead to further declines. Additional support can be found at 62.80, 61.00 and then 60.40. On the flip-side, a bullish reversal above 63.00 would find resistance at 64.20 and then 65.00.
USDCAD has broken above the March 2017 trend line and is testing the 78.6% Fibonacci retracement at 1.2780. A break of this level is needed for continued upside movement, with resistance at 2.2860. Strong resistance can be expected at highs of 1.2920, which is also the 50% retracement of the decline from March 2017. A bearish reversal and break below 1.2720 would change the outlook, with support at 1.2665 and then 1.2620.