USD/CAD – Canadian dollar hits 6-week high after OPEC cuts

The Canadian dollar continues to rally on Monday after oil prices surged. OPEC surprised the markets on the weekend with production cuts, sending oil prices higher by 6.5%. On the release front, the Bank of Canada Business Outlook Survey found that businesses and consumers are concerned about inflation and interest rates. In the US, the ISM Manufacturing PMI declined for a fourth straight month, slipping to 46.3 points.

In the North American session, USD/CAD is trading at 1.3431, down 0.63% on the day.

The Canadian dollar remains hot

Is that the Canadian dollar streaking by? The loonie climbed every day last week and has rallied about 300 points since in just six days. The Canadian dollar hit a high today of 1.3425, its highest level since February 16th.

The banking crisis which roiled the global financial markets has eased, and an increase in risk appetite last week has benefited risk currencies like the Canadian dollar. The OPEC surprise has further boosted the Canadian currency on Monday. OPEC announced voluntary cuts of about 1.15 million barrels a day in order to support “market stability”.

The move comes at a delicate time for the world’s major economies, many of which are struggling with high inflation and weak growth. Canada will benefit from higher oil prices, but the country also imports much of its oil and the increase in prices will weigh on growth and push inflation higher, complicating the Bank of Canada’s tough battle to contain inflation.

The Bank of Canada released its Business Outlook Survey today and the news wasn’t great. Businesses and consumers are worried about a recession, and rising interest rates and high inflation have dampened expectations.

In the US, the manufacturing sector continues to sputter. The March ISM Manufacturing PMI slipped to 46.3, down from 47.7 in February and shy of the estimate of 47.5 points. The PMI recorded a decline for a fourth straight month and is at its lowest level since May 2020. Supply chain issues persist and demand has declined from both the domestic and foreign markets.

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USD/CAD Technical

• USD/CAD is testing support at 1.3431 earlier today. The next support level is 1.3354
• 1.3590 and 1.3673 are the next resistance lines

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