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Loonie, Oil Steady Ahead of Key Data from US and Yellen Testimony

Published September 28, 2016
  • USDCAD is holding just above the 1.3200 handle, below yesterday's high of 1.3286 and the 200 Day Moving Average (DMA) at 1.3233
  • Oil has regained its footing and is up 1.5% in early trade a day after talks regarding a potential production deal between Iran and Saudi Arabia fell apart even before they really began
  • Saudi Arabia offered to cut production by an undisclosed amount if Iran freezes production at its current 3.6M barrel per day pace 
  • Yesterday's crude inventory data from industry group API showed a surprise drawdown of 752k barrels in the US compared to an expected 3M build
  • At 1030am ET this morning, official inventory data is released from the US Energy Information Administration which is expected to show a build of 2.9M barrels last week
  • The US reports durable goods data at 830am ET which is expected to show a 1.4% drop for the month of August compared with a 4.4% gain during July
  • Also today, Fed Chair Janet Yellen will be testifying before the House Financial Services Committee while four of her colleagues will be delivering prepared remarks throughout the day
  • USDCAD has found good support near the 1.3200 level so far this week and the bias remains higher, however, there are three key technical levels that need to be cleared before USD bulls jump on the band wagon
  • The 200 DMA at 1.3233 along with congestion near range highs at 1.3255 and the 38.2% Fibonacci retracement of the 2016 fall from 1.4690-1.2457 at 1.3310 will attract lots of USD selling pressure over the next couple of days 
  • If the market can close above those three levels in the near term, that should usher in the next leg higher in USDCAD with initial targets circa 1.36 and then 1.3837
  • Conversely, failure to close above there would likely see the current range persist (with good support found in the 1.3000 and 1.2900 area)

Charts: (1) USDCAD testing key resistance c. 1.3239/1.3255. (2) USDCAD Seasonality Q4 Study: 2012-2015 rebased to zero, average in white. USDCAD gained avg of 3.08% in Q4 2012-2015. (3) Economic Calendar.