The Organization of the Petroleum Exporting Countries announced on Wednesday that an oil output deal had been reached, sending WTI crude oil prices higher by nearly 10%. There have been several periods of divergence between oil prices and USD/CAD since discussions started taking place regarding an output cut back in late October, and a similar divergence has been seen today as the Loonie has failed to gain on the back of the significant rise in oil prices. USD/CAD posted some loses in the early European session but has been recovering and was last seen trading at 1.3424 remaining relatively unchanged on the day.
WTI crude oil (USOIL) dipped briefly below the $45.00 handle on Tuesday and has been steadily bid higher today, last seen making an attempt at the $50.00 handle. OPEC has agreed to cut production by 1.2 million barrels a day to 32.5 million barrels, reflecting a 4.5% cut. Analysts expect the output cut will boost oil prices above the $50.00 price point and maintain prices above the level.
The Energy Information Administration reported weekly crude oil inventories to decline by 88,000 barrels against expectations for an 80,000 build. Oil prices remained relatively unaffected by the report as markets awaited news from OPEC.
The US Dollar index (DXY) recovered to trade at fresh weekly highs today, on track to erase declines from the prior two days. The index breached to new weekly highs just ahead of the European close and is seen consolidating near the level. The daily print signals a technical continuation in the broader uptrend.
Canadian GDP was reported to rise for a fourth consecutive reading, the figure was reported to rise 0.3% in September to beat analyst expectations for a rise of 0.1%. The US core PCE inflation rate was reported unchanged at 1.7% annually, comments from the Fed will be closely watched after the latest FOMC meeting minutes indicated optimism to recent rises in inflation.
USD/CAD briefly dipped below support from last week’s lows at 1.3378 but has shown a recovery with a bullish engulfing candle print on the 4-Hour chart indicating strong buying near the support level. The support level at 1.3378 will continue to be an important level to watch with further support falling at the lower line of a declining channel drawn from highs posted in the middle of the month.