img CDN
img AUS
img NZ
img US
Call us now: 1.844.363.7297
imgOnline Dealing Login

Loonie Consolidates Above 1.33 As Oil Tumbles

Published October 26, 2016
  • USDCAD is trading comfortably in the mid 1.33's this morning with price action largely driven by lower oil prices
  • WTI front month prices have declined by 1.6% thus far to $49.16, their lowest level since October 10
  • According to the American Petroleum Institute's (API) inventory data which was released yesterday afternoon, crude inventories unexpectedly rose last week
  • If the data is confirmed by the official Energy Information Administration (EIA) report due this morning at 1030am ET, we could see crude extend its losses
  • In addition to inventory figures, perceptions surrounding OPEC's proposed production cut are starting to become more skeptical
  • The market responded very positively to OPEC's initial promises made in September but now something has to be delivered by the end of November or else there will be a much larger pull back in crude prices
  • The reason for the skepticism is that four major players have asked for exemptions from any deal: Iran, Iraq, Libya and Nigeria
  • Iraq is the most contentious, being the second largest OPEC producer with over 4M barrels a day; they’ve requested a release from any production agreement in order to maintain oil revenues needed in fights against ISIS
  • If Iraq does not cut production, then the onus falls on Saudi Arabia which has fought tooth and nail to maintain market share by increasing production for the last two years; it seems a stretch at present for them to crater on that front
  • Apart from EIA oil data the only other major release is US New Home Sales (0.6M expected) at 10am ET
  • Thursday we have US Durable Goods and Friday there is a slew of top tier US data highlighted by GDP and Consumer Sentiment which could really cause some volatility for USDCAD to close out the week

Charts: (1) USDCAD breaks out to the topside. (2) Fed rate hike odds above 60% for Dec. (3) Oil prices pull back. (4) Economic Calendar.