Mondays CAD decoupling from the price of oil proved to be a mirage. With both West Texas and Brent crude falling by more than 4 percent the Loonie lost ground versus the USD in the Tuesday trading session. The price of oil got a temporary reprieve after rumour circulated (and where fanned by official comments) about a potential production deal between Organization of the Petroleum Exporting Countries (OPEC) and Non-OPEC members such as Russia. Iran claimed to know nothing which did not bode well for the future of the agreement if the fourth largest nation by oil reserves is not in the loop.
The drop in oil drove the USD higher versus commodity currencies and the CAD was no exception. There were no economic indicators today that could help the CAD against the negative price move of oil and gas. The tumble in the energy sector made investor wary of taking in more risk and they headed for safer assets such as the EUR, the JPY and gold.
The USD/CAD advanced 0.34 percent in the last 24 hours. The pair has traded with a 1.25 percent volatility between the daily high and low given the turmoil in the oil market. The USD/CAD is trading near session highs at 1.4050 awaiting tomorrow’s first U.S. employment related release with the publication of the ADP private payrolls data. The previous month private employers added 275,000 new jobs which correlated with the also massive gain of 292,000 on the U.S. non farm payrolls (NFP).
Along with the private payrolls data the U.S. will release its ISM non manufacturing PMI and the U.S. Energy Information Administration will release the weekly crude oil inventories which will have a direct impact on the price of the black stuff as OPEC and non-OPEC have so far failed to come to an agreement on who to reduce production to make prices rise.
Canadian data will share the spotlight on Friday, but will not be the center of attention as the market will be more focused on the NFP report. CAD traders will keep an eye on the price of crude and how the employment situation in the U.S. and Canada has changed since last month’s positive figures.
USD/CAD events to watch this week:
Wednesday, February 3
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
Thursday, February 4
8:30am USD Unemployment Claims
Friday, February 5
8:30am CAD Employment Change
8:30am CAD Trade Balance
8:30am CAD Unemployment RateUSD
8:30am USD Non-Farm Employment Change
8:30am USD Trade Balance
8:30am USD Unemployment Rate
*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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