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China data misses; oil prices rise on Goldman call

Published May 18, 2016
  • Overnight market action was relatively subdued despite poor data releases from China over the weekend that reinforced the lower growth profile many are expecting from the world’s second largest economy
  • Chinese industrial production, retail sales and investment data all came in well below expectations despite recent monetary stimulus measures to support growth
  • Oil prices, however, have largely shrugged off the implications of lower demand from the Chinese economy and are posting their highest prices since November 2015 as WTI rises above $47 for a gain of 2% thus far
  • The move in oil seems to be precipitated by a report from Goldman Sachs calling for higher prices as they expect output disruptions in Nigeria, Canada, Venezuela and China to bring an end to almost two years of oversupplied crude markets
  • The Canadian dollar is slightly higher on the day as a result, trading in the low 1.2900’s this morning against the USD
  • There are no major economic releases today from the US or Canada, however lots of top tier data comes out later in the week with the U.S reporting inflation, housing, industrial output and home sales while Canada releases inflation and retail sales data

USDCAD Technical Glance
USDCAD remains well supported above its 21 day moving average at 1.2750 and the Relative Strength Index is also playing into the greenbacks favour as it trades above the 50 level indicating positive divergence.  This morning’s higher oil prices will certainly test the mettle of USD bulls this week – a daily or weekly close below the key 21 DMA will likely mean the USD recovery is over for now.