USD/CAD: Loonie weakness extends as oil prices drop

USD/CAD has been hit with heightened volatility given bond market chaos and the big moves in the oil market.  The dollar rally has paused against euro and yen, but it continues against commodity currencies.  Demand for all commodities are taking a hit here as surging Treasury yields are driving global growth concerns. Price action on the USD/CAD daily chart is showing the recent bullish rally is tentatively breaking above key trendline resistance that has been in place since the start of the pandemic.

The oil price rally also ran out of steam, which is providing an additional layer of selling pressure on both the Canadian dollar and Norwegian krone.  If further bullish momentum remains, the Canadian dollar could fall to as low as 1.3820 to the dollar.  Major support lies at the 1.3475 region.

Commodities

Oil

This was an easy OPEC+ JMMC meeting.  The OPEC+ Ministerial Panel supported no policy changes. The energy market has already priced in the decision that the Saudis and Russians were always going to support the supply curbs of more than 1 million bpd going into year-end.

In order for $100 oil to happen, we need to see a fresh catalyst.  The current state of the oil market is that global economic pain is coming courtesy of surging bond yields.  Crude demand destruction will occur this quarter, but this pullback in prices will be limited given the risks of further shocks to supplies and a reacceleration of the US economy.

Gold

Gold prices are stabilizing after an overnight plunge made a key bottom after 30-year Treasury yield tentatively broke above the 5.00%.  Gold is about to form its pre-NFP trading range, which should support prices trading between the $1830 and $1850 region. 

Copper

Copper is getting hit with a one-two punch as inventories rise and as growth concerns follow this global bond market selloff. Fund managers are also jumping on this short as price action falls to the lowest levels since the spring.

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