Oil prices rose sharply on Wednesday as OPEC had reached an oil output agreement. USD/CAD showed resilience, however, as the exchange rate closed the day out for a marginal gain despite a single-day gain of over 8% in WTI crude oil prices.
The Loonie has strengthened today as oil prices are seen rising for a second consecutive session. The Canadian Dollar has outperformed its counterparts on Thursday to post the largest gains among the majors.
USD/CAD fell under pressure shortly ahead of the European close on Wednesday and gained downside momentum at the European open today. The pair trades at a pivotal area as the bottom line of a declining channel has come into play. The channel is seen on a 4-hour chart and has encompassed price action since the middle of the month.
A downside break would put the pair at risk of a broader correction as the November lows are seen within close vicinity and a channel break would likely lead to a break below the prior month lows. Bulls will want to see a turn in the current area to keep the broader uptrend intact.
WTI crude oil prices (USOIL) have regained the $50.00 price point in today’s session but resistance has come into play from prior highs of the year. Resistance seen around $51.64 triggered a turn lower in June and October. A high of 51.76 was posted today prior to a pullback, USOIL was last seen at $50.88 for a daily gain of 3.96%.
After posting a sharp move higher, the US Dollar index (DXY) turned lower today to wipe out the bulk of Wednesday’s gains. The index was last seen trading at 100.89 for a loss of 0.63% against the opening price of 100.86 yesterday. Today’s price action will negate Wednesday’s bullish engulfing candle and sets a bearish technical tone ahead of Friday’s jobs report.
The US non-farm employment change is expected to increase 165,000 on Friday while the unemployment rate is expected unchanged at 4.9%. The average hourly earnings are expected to rise 0.2% after a rise of 0.4% in the prior reading. The data may have a muted reaction in the markets as only a significant miss will cause concerns over a December rate hike. With labor markets seen at near full employment, inflation will be important, putting a spotlight on the average hourly earnings figure.
On a 4-hour chart, USD/CAD is seen trading slightly below the lower bound of the declining channel. The candle close will be important in assessing if a downside break has materialized. Further support at 1.3264 reflects November lows and a breach would suggest a broader turn has taken place. To the upside, the first level of resistance is seen at 1.3378 referencing last week’s low.