USD/CAD – Canadian Dollar Jumps Ahead of OPEC Meeting, US GDP Next

The Canadian dollar has started the week with strong gains. In the North American session, the pair is trading at 1.3430. On the release front, there are no economic indicators out of the US or Canada. The sole event on the schedule is a speech from Governor Stephen Poloz in Toronto. Tuesday will be busier, as Canada releases Current Account, with the deficit expected to narrow. The US will release Preliminary GDP for the third quarter, with the markets expecting a sharp gain of 3.0%. The other key indicator is CB Consumer Confidence, which is expected to improve to 101.3 points.

OPEC members will meet in Vienna on Wednesday, hoping to reach an agreement to cap production in order to boost oil prices. OPEC wants to include non-OPEC countries as well, and Russia has come out in favor of a freeze. However, it’s far from certain that OPEC members will reach an agreement. Iraq, Libya and Nigeria have all asked to be left out of a deal which would require production cuts. Previous attempts to reach a cap agreement have ended in failure, and it’s questionable whether this time will be any different. Given the uncertainty as to whether an agreement will be reached, we could see continue to see strong movement from the Canadian dollar this week, as the currency is closely tied to oil prices. If a deal is reached, the Canadian dollar could post strong gains.

The US economy continues to improve and consumer confidence has been an important factor, as higher confidence levels usually translate into increased consumer spending. Last week, UoM Consumer Sentiment jumped to 93.8 points, beating the forecast of 91.6 points. This reading was the indicator’s highest level since May. CB Consumer Confidence follows on Tuesday and is expected to follow suit with a higher reading for November.

The Federal Reserve appears poised to raise interest rates by a quarter-point in December, with the odds of a rate hike at 93 percent. The Fed minutes were released on Thursday, indicating that policymakers felt it appropriate to raise rates “relatively soon”. Earlier this month, Fed Chair Janet Yellen used the same phrase in her testimony before a congressional committee. The minutes indicated that some members argued that the Fed needs to raise rates in December in order to preserve the bank’s credibility – despite some broad hints of rate hikes during 2016, the Fed has stayed on the sidelines throughout 2016, causing significant disappointment and frustration in the markets.

USD/CAD Fundamentals

Monday (November 28)

8:00 BoC Governor Stephen Poloz Speech

Tuesday (November 29)

• 8:30 Canadian Current Account. Estimate -16.4B
• 8:30 US Preliminary GDP. Estimate 3.0%
• 10:00 US CB Consumer Confidence. Estimate 101.3 points

*All release times are EST

*Key events are in bold

USD/CAD for Monday, November 28, 2016

USD/CAD November 28 at 8:50 EST

Open: 1.3520 High: 1.3522 Low: 1.3437 Close: 1.3427

USD/CAD Technical

• USD/CAD posted losses in the Asian session. The pair showed limited movement in the European session and has posted sharp losses in North American trade.
• 1.3371 is providing support
• 1.3457 has switched to resistance and remains a weak line

Further levels in both directions:

• Below: 1.3371, 1.3253 and 1.3120
• Above: 1.3457, 1.3551, 1.3648 and 1.3782
• Current range: 1.3371 to 1.3457

OANDA’s Open Positions Ratio

USD/CAD ratio has shown slight movement towards long positions. Currently, short positions command a strong majority (58%), indicative of trader bias towards USD/CAD continuing to move to lower ground.

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