[DanRath]

Crude oil briefly touched US$60/bl last week. USD/CAD had a fleeting visit below 1.1500. Although some question the near-term sustainability of these trends, a more durable oil rally will likely develop within 6 months. As prices move toward US$70/bl, multi-billion dollar cross-border M&A announcements cannot be ruled out, with obvious bullish implications for CAD.

The economic viability thresholds of new oil sands projects have declined sharply since 2008 and investors will surely revisit this sector well before crude oil reaches last year’s threshold of roughly US$80/bl.

USD/CAD downtrend comes to an end

The recent selloff in USD/CAD stalled right against a support trendline at 1.1477 as the daily studies reached oversold valuation levels. This development was magnified by a subsequent bullish trend reversal above 1.1689 as a buy signal was issued on the studies. The resulting shift in trend bias to the topside indicates that support at 1.1584 and 1.1477 should now attract buying interest for a test of initial resistance at 1.1869 (38.2% Fibonacci retracement of the April-May decline), followed by 50% retracement at 1.1990 and the 1.2030 level. Prices will have to register a daily close below 1.1477 in order to nullify our bullish stance