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USDCAD Guarded Ahead of Key Event Risks

Published November 28, 2016
  • USDCAD continues to trade in a very tight range near 1.3500 as multiple event risks come into focus this week
  • The early focal point will be headlines and reactions leading up to OPEC's Nov. 30th Ministers Meeting
  • An agreement to cut production looks rather perilous at the moment, especially following comments on the weekend from Saudi Arabia's energy minister that the oil market would balance itself in 2017 even if producers did not intervene
  • His comments certainly throw cold water on what is sure to be a contentious meeting, where the outcome is anything but certain; a production cut could easily be scrapped and replaced with commitments to freeze production instead
  • Nonetheless, burgeoning US supply and the potential for a resurgence of E&P under a Trump administration could underline the effectiveness of OPEC action
  • Closer to home, BoC Governor, Stephen Poloz, speaks later this evening in Toronto 
  • The BoC delivers their latest interest rate decision next week and the market may be getting a little complacent on the prospect for rate cuts, especially given the uncertainty surrounding NAFTA renegotiations
  • Economic data is heavy this week with major releases from both Canada and the US, culminating with Friday's dual jobs reports for November (Chart 3)
  • USDCAD near term support and resistance continues to lie at 1.3400 and 1.3575, respectively, with the longer term bias to the topside as interest rate differentials continue to favour the US dollar

(1) USDCAD supported by diverging US-CA 2yr yields. (2) OPEC production vs. proposed cut. (3) Economic Calendar.