The USD/CAD had dropped below the 1.2860 price throughout the early Friday morning in Asia. This is due to US dollar weakness and US equities record highs.
The US Dollar has moved lower for months in the wake of its first surge throughout the early on days of the Covid-19 pandemic. The Fed is committed to maintaining its accommodative attitude and discussions of further fiscal stimulus is taking place in Washington. Considering these, the case for further USD weakness can be made. Alternatively, a hurt global economy has seen sectors like energy and risk-sensitive currencies like the Canadian Dollar recover.
OPEC and Russia agreed to relieve their oil output cut by 500k barrels per day starting January 2021. OPEC_ will cut production by only -7.2m bpd, or -7% of global demand, compared to current cuts of -7.7m bpd. In addition, the group will meet at every month to review the output policies beyond January, with monthly increases in production not exceeding 500k bpd.
WTI crude oil busted out of near term range on the news and hit as high as 46.43 so far. Near term outlook will now remain bullish as long as 43.78 support holds. 50 psychological level is the next hurdle. Reaction from there would decide whether the rise from March’s spike low would develop into a sustainable long term up trend.
These themes have helped push the Loonie lower for months and a recent break below crucial support might have opened the door for further losses. To that end, 1.2929 – the November 9 swing low – had served as an important level working to stave off further losses but with price plunging beneath, USD/CAD seems vulnerable to a continuation lower.
Bears look to drive the pair lower, with the next support at 1.2800 area which coincides with the October 2018 swing low. Nevertheless, USD/CAD has already fallen considerably and shorter-term recoveries are not out of the question. Given the degree to which USD/CAD has slipped over the last few months, however, prior support might serve as resistance going forward making attempted recoveries all the more arduous.
We remain bearish with all eyes at the Fridays US NFP number which will make waves this afternoon.
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