Canadian Dollar to Look Past Saudi Arabia Oil Cuts as WTI Fills a 4% Gap Within a Day

Canadian dollar, USD/CAD, OPEC cuts? Technical Analysis – Asia Pacific Briefing:

• Canadian dollar weakens though Saudi Arabia oil production cuts
• The broader OPEC+ coordination failure closed the gap on WTI
• Global slowdown growth may stay oil the prices pressures at present

The Canadian dollar takes a little bit from another OPEC meeting

The Canadian dollar has weakened against the US dollar over the past 24 hours. This is despite the relevant news in the field of crude oil. The last OPEC meeting over the weekend concluded with Saudi Arabia cutting production by about 1 million barrels per day from July. It was a somewhat unusual meeting, as the coalition failed to reach broad agreement on the need to cut production to revive oil prices.

Although WTI crude rose more than 4 percent to start the trading week based on this news, the commodity filled it within 24 hours, ending the session flat. From a fundamental point of view, the road ahead for oil is still difficult. Tightening global monetary policy acts as a brake on growth. This was seen recently in the form of disappointing manufacturing data from China.

With this in mind, if there is no overall coordination among OPEC+ members, it may be difficult for one country on its own to support the market. This is very relevant for Canada and USD/CAD since oil is one of the main domestic exports. A material deviation in the path of a commodity’s price can have major implications for the economy, inflation, and the Bank of Canada.

In the meantime, the Loonie may remain focused on the ongoing story about the global growth trend. Looking at the remaining 24 hours, the economic docket is rather light outside of the RBA interest rate decision. But, USD/CAD may remain focused on market sentiment. A somewhat pessimistic trading session on Wall Street could create a cautious headwind for the currency ahead.

Technical analysis of the Canadian dollar

On the daily chart, USD/CAD appears to have support around the inflection point of 1.3412. A turn to the upside from here puts the focus on the downtrend line from March. This can hold up as resistance. Meanwhile, any dip through the inflection point exposes a rising trend line from November, which may hold as support. As such, consolidation could be the way forward for the Canadian dollar until meaningful breakouts are made.

USD/CAD daily chart

Chart created in TradingView

– By Daniel Dubrovsky, Chief Strategist for DailyFX.com