Overnight Range 1.3358-1.3450
There is a month end feast going on and the Loonie is the entrée du jour. Oil traders have turned yesterday’s frown upside down and have driven WTI from an overnight low of $45.17/b to $48.65 (as of 7:20 am EST). All it took were comments from Saudi Oil Minister Khalid al-Falih saying that Opec was close to a deal to cut output by about 1 million barrels per day. Even Iran joined the party. The Iran Oil Minister was ‘optimistic” that a deal could be done because Iran’s production would not be cut.
The Canadian dollar is an obvious beneficiary of this news. USDCAD selling pressure has intensified by reports of a large demand for Canadian dollars for month end portfolio rebalancing purposes. USDCAD has plummeted from 1.3450 in Asia to 1.3358 as of 7:20 am EST.
The Canadian dollar got a modicum of support from this mornings release of stronger than expected Q3 GDP data (Actual 3.5% vs. forecast 3.4%) and a jump in the Industrial Product Price Index (IPP rose 0.7% vs. 0.4% gain in October.)
The overnight session was quiet but not sombulent.
In Asia, AUDUSD suffered from soft economic data in the form of weaker than expected building permits data. The move didn’t last and the currency pair recouped almost all those losses only to reverse course when Europe started trading. It opened in New York at 0.7460, the Asia low. Kiwi strengthened steadily supported by the Financial Stability Report and positive comments about inflation by the RBNZ Governor Graeme Wheeler.
USDJPY has rallied from an Asia low of 112.04 to 113.17 on the back of improved risk sentiment stemming from Opec news.
EURUSD has been a by-stander in overnight trading. Traders are nervous ahead of Friday’s US employment figures and the weekend referendum in Italy.
In a nutshell, the Italian Prime Minister Matteo Renzi has promised to resign if he loses the referendum on Parliamentary reform. That could lead to another election, empower anti-Euro factions and lead to the failure of some Italian banks.
Asia equity indices were mixed. The Nikkei closed with a 5.07% gain in November. European equity indices were in the green as are US equity futures.
November is ending with a bang. The ever-increasing prospect of an Opec production cut deal has triggered a steep rally in oil prices and led to selling of USDCAD. Expectations of additional USDCAD selling for month end portfolio rebalancing risk will add to the downside pressure. The impact from US data releases will be limited.
USDCAD technical outlook
The intraday and short term USDCAD technicals have flipped to bearish following this morning’s break of support in the 1.3390-1.3400 area. The downtrend is intact while prices are below 1.3490 with a break of key support in the 1.3340-60 area extending losses to 1.3260. For today, USDCAD support is at 1.3340, 1.3305 and 1.3260. Resistance is at 1.3490 and 1.3520
Today’s Range 1.3305-1.3405