• USD/CAD is at eight-week highs and testing 1.2700 amid USD strength post-Powell’s renomination.
  • A lack of important Canadian economic events this week means the pair will be driven by oil, risk appetite and US dollar dynamics.

USD/CAD flew to fresh eight-week highs on Monday as it briefly moved above the 1.2700 level for the first time since early October. At current levels close to 1.2700, the pair is trading higher by just shy of 0.5% on the day. Now that resistance in the 1.2650 area has convincingly been broken and the pair is already at 1.2700, the next logical stop to the upside would be the 29 September high in the 1.2770s. Conversely, any retracement back lower may find buyer interest in the mid-1.2600s and then again around 1.2600.

The move higher was spurred by broad strengthening of the US dollar versus all of its major counterparts after the news broke of Jerome Powell’s renomination as Fed chair. With the loonie around 0.5% lower on the day versus the buck, that puts its in line with the losses seen by most of the majoriy of the rest of its G10 counterparts on the day versus the buck. GBP and EUR are down 0.4%, CHF, CAD and NZD 0.5% and JPY 0.8%. Oil prices were choppy throughout the day and, despite eventually ending the session with reasonable gains, did little to help the loonie.

Aside from a speech from Bank of Canada Deputy Governor Paul Beaudry, there is very little interest on the Canadian economic calendar this week. That means USD/CAD will likely be driven by oil, risk appetite and US dollar dynamics. On which note, US economic events are predominantly packed into Tuesday and Wednesday given Thursday is Thanksgiving holiday, with traders focused on US flash PMIs, Durable Goods Orders and October Core PCE inflation data.

Choppy oil prices

Front-month WTI futures were down over 1.0% at lows on Monday and briefly dipped under $75.00, printing fresh seven-week lows in the process, but eventually finished the day higher in the upper $76.00s for a daily gain of over $1.0. That still leaves WTI more than 10% below recent highs set back at the end of October of above $85.00 per barrel.

Oil traders are currently juggling developments in the politics of global oil supply. Bloomberg reported on Monday that the Biden administration is on the cusp of making a big announcement on crude oil reserve release plans that will sychronise with reserve releases from a number of other major oil-consuming nations. Reportedly, officials in Japan and India are looking at ways to release reserves in tandem with the US, while China has already publically made its plans to release reserves known.

But OPEC+ has delivered a counterstrike. Another Bloomberg report, citing delegates, suggested that the cartel may alter its plans to continue gradually hiking production in the months ahead if the US and other nations release oil reserves. Oil traders took this as a threat from OPEC+ to withhold supply to offset the impact of the oil reserve release.

This article was originally published by Fxstreet.com.Read the original article here.

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