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USDCAD Steady Near 1.35 as Oil Slides

Published November 25, 2016
  • USDCAD continues to trade in a tight range either side of 1.3500 as the week comes to an end
  • Oil prices are sliding with WTI down just over 1% to $47.41, perhaps influenced by reports that Saudi Arabia plans to supply more crude to Asian markets in an effort to regain lost market share
  • This news comes ahead of next week's OPEC ministerial meeting on Nov 30th, where a production cut agreed to in September is expected to be ratified into policy; however, this is not a forgone conclusion as Iran and Iraq are still opposed to any limits on their output
  • USDCAD options activity is also having an influence on price action this morning with the 10am NY cut bringing 867M in expiries struck at 1.3500
  • This will likely keep spot tethered to its tight range until then
  • Option volatility quotes for the next week now capture OPEC's Nov 30th meeting and Friday's dual US and Canadian jobs reports
  • These events are ripe for large volatile price swings so prepare as best you can if you have unhedged exposures 
  • Next week brings a slew of important data along with the jobs reports, as both countries also report GDP figures while the US adds consumer confidence and ISM manufacturing
  • Canada's Federal Liberal government is also expected to issue rulings on two pipelines next week, with the controversial Northern Gateway expected to be vetoed for environmental concerns and the retrofit of Enbridge's Line 3 pipeline to Wisconsin will be given the thumbs up
  • All in all, the landscape continues to favour the US dollar over the Loonie
  • US government yields continue to diverge from those in Canada and this is supporting USDCAD spot; corporates who are short USD are best to pursue a 'buy the dip' strategy

(1) USDCAD supported by diverging US-CA 2yr yields. (2) USD Index breaks out. (3) OPEC production vs. proposed cut. (4) Economic Calendar.