With crude oil prices rebounding, attention may turn to gains in resource-rich currencies

With crude oil prices rebounding, attention may turn to gains in the currencies of resource-rich nations

07.12.2021

Yesterday, the three major U.S. stock indices all rebounded, creating a full-blown risk-on market characterized by rising stock prices, interest rates, and oil prices. WTI crude oil recovered to the key $70 level and is currently trading in the $70.1 range per barrel. The VIX (fear index) fell by about 11% and is hovering around 27.1. Gold continues to trade sideways, remaining in the $1,780 range.

In the foreign exchange market, the Canadian and Australian dollars—currencies of resource-rich nations—are rising in tandem with the increase in crude oil prices. In particular, as market sentiment shifted toward risk-on, the Canadian dollar rose sharply against the Swiss franc. The CAD/CHF pair rebounded by more than 100 pips, climbing from 0.712 to 0.726.On the daily chart, the CAD/CHF pair has formed an "engulfing candle" that encompasses the real bodies of the past five candles. We need to closely monitor whether this upward momentum will continue into the latter half of this week.

Today, German industrial production and UK Halifax house prices are scheduled for 4:00 PM, the German ZEW Economic Sentiment Survey for 7:00 PM, and the Canadian and U.S. trade balances along with the U.S. third-quarter nonfarm labor productivity (final reading) for 10:30 PM.at 12:00 AM: Canada’s Ivey PMI; at 3:00 AM: U.S. 3-year Treasury auction; and at 5:00 AM: U.S. consumer credit balances. We will closely monitor these developments alongside the various economic indicators to determine whether the current risk-on sentiment in the market will persist.