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NY Open: Oil price collapse sinks Loonie

Forex 4 minutes to read
Michael O’Neill

FX Trader,

Summary:  The Canadian dollar is taking the honours for being the worst performing G-10 major currency against the US dollar since yesterday’s New York close and for the week, as well.

Concerns about the ratification of the new US-Mexico-Canada trade agreement, USMCA, pummelled the Canadian dollat, as did a steep drop in oil prices and news that a US judge blocked progress on the Keystone XL Pipeline. A Canada-wide postal strike has prevented traders from seeking solace in newly legalised cannabis because it is only available by mail. USDCAD is trading at the top of its overnight range and threatening to test resistance at 1.3250.

Oil prices are leaking lower due to fears of slowing global growth, the US waivers allowing eight countries continue importing Iranian oil for a while, plus a surge in US oil production to 11.3 million barrels per day. WTI is trading just above the overnight low of $59.35/barrel.

Wall Street is in the red. The 2.4% drop in WTI oil prices overnight and weak China data spooked traders into selling to protect this week’s gains. The Federal Open Market Committee statement reminded traders that US rates were going higher in December and then probably every quarter next year as well.

Back to economic basics 

Hard economic data will be in the driver’s seat next week, although political drama will be lurking in row two, rather than at the back of the bus. 

Markets get a healthy dose of top-tier data beginning on Tuesday when German CPI, ZEW Sentiment survey and UK employment data are available. The unemployment rate is expected to be unchanged at 4%, but there is an upside risk to Average Earnings.

Tuesday is also the day Italy is supposed to present a revised budget to the European Union. Italy is expected to ignore the demand.

Wednesday has the potential to be the most volatile day. Asia has Australia Consumer Confidence, China Retail Sales, and Industrial Production. In Europe, German and Eurozone GDP will rival UK Inflation for prominence. Thursday, AUDUSD may get another boost from a robust employment report while US Retail Sales expectations should underpin the US dollar.
USDCAD 4-hour chart. (source: Saxo Bank)

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