With Crude Oil Prices Rebounding, Attention Turns to Gains in Resource-Rich Countries’ Currencies

With Crude Oil Prices Rebounding, Attention Turns to Gains in Resource-Rich Countries’ Currencies

07.12.2021

Yesterday, the three major U.S. stock indices all rebounded, creating a full-fledged “risk-on” market characterized by rising stock prices, interest rates, and crude 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 trading 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 countries—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, rising from 0.712 to 0.726.On the daily chart, the CAD/CHF pair has formed an “enveloping candle” that encompasses the real bodies of the past five candles. We need to closely monitor whether this rebound momentum will continue into the latter half of this week.

Today, Germany’s industrial production and the UK’s Halifax house prices are scheduled for 16:00; Germany’s ZEW Economic Sentiment Survey at 19:00; Canada’s trade balance and the U.S. trade balance at 22:30; the U.S. third-quarter nonfarm labor productivity (final reading);at 24:00, Canada’s Ivey Purchasing Managers’ Index; at 27:00, the U.S. 3-year Treasury auction; and at 29:00, U.S. consumer credit balances. We will carefully monitor these developments in light of the various indicators to see if the current risk-on sentiment in the market persists.