Canadian dollar slides as oil prices decline

The USD/CAD pair reached a seven-month high of 1.3780 before falling back to 1.3730. The pair experienced an initial rebound from the 1.3700 level and is expected to climb higher if bullish momentum persists. The Canadian dollar’s chances of a short-side reversal may be increasing as the Relative Strength Index (RSI) is approaching overbought levels.

On Wednesday, the Canadian dollar lost more ground to the US dollar, pushing the USD/CAD pair to a new seven-month high. As crude oil barrel prices continued to fall, the Canadian dollar’s support is eroding. Concerns about global supply bottlenecks have sent barrel prices upward, but rebalanced investor outlooks are bringing gasoline costs back down.

The probability of another rate hike by the Bank of Canada (BoC) this year is 65%, and the CAD might receive some much-needed support with one more rate increase. As investors recalibrate their forward-looking assumptions of supply restrictions, the price of a barrel of crude oil is declining. Bidders of the Canadian dollar will be anticipating Thursday’s release of the Ivey Purchasing Managers Index (PMI) for September.