US Crude Oil and USDCAD Push Synched Range Swings Ahead of US CPI
The markets are abuzz with the anticipation of Tuesday’s US CPI release, but what do we expect to happen after the update? As a result, we’re going to take a look at two key assets that have exhibited robust congestion patterns this year – WTI crude oil futures contract and USDCAD – and see if their broad ranges are vulnerable to the volatility that comes with Tuesday’s top event risk.
Crude: A Grand Technical Picture and a Core Fundamental Connection
The market is speculating that the Federal Reserve will keep pushing higher rates. That would be a big push for the Dollar, but it could also cause some significant volatility in US-based crude oil. In this regard, it’s not a good time to take the bullish view for US-based oil.
Traders are expecting CPI inflation to be strong, but that may not translate into a sharp dollar rally. In fact, a large number of forex traders are leaning on the so-called Core CPI, which excludes volatile energy and food prices.
That’s because this number will give us a better idea of how well the United States is separating itself from inflationary pressures. That’s important because it will help to determine whether the Fed will be ready to hike interest rates in 2023.
Gold: A Lucky Valentine for Longs
This week, we’ll be looking at a number of economic reports that will have an impact on the gold market. The first one is the Consumer Price Index, or CPI, for January. While this number is not as flashy as the other numbers, it’s still an important read for gold longs to pay attention to.
If the CPI prints a big increase in January, it could be a boost to the dollar. However, if the number falls short of the market expectations, it could be a negative for gold longs.
USDCAD: The Biggest Speculator Position Is Nearing the Lowest Level in 7 Years
There’s been some major change to the long-term net long position in the USDCAD pair, which is the biggest speculator position since the market bottomed in August. This change has been driven by a drop in the spread between ICE’s USDCAD spot rate and the underlying US Dollar index, which is currently nearing its lowest level in seven years.
This move is largely a function of the Dollar’s recent weakness, which has been driven by higher Treasury yields and an unease that the Fed will raise interest rates sooner than expected. Nevertheless, this shift hasn’t changed the fact that the market is very crowded. That’s why there’s a lot of risk in the USDCAD pair, and the big question is whether this trend will continue or if it will reverse.