Oil price surge swamps USDCAD

Commodities 4 minutes to read

Michael O’Neill

FX Trader, Loonieviews.net

Summary: The Canadian dollar soared in tandem with WTI crude oil prices following the release of today's EIA inventories data.

USDCAD collapsed from 1.3360 at the New York open to 1.3313 as of 14:15 GMT coinciding with a surge in WTI oil prices to $58.05/barrel from an overnight low of $57.04/b. The rally was fueled by a surprise decline in weekly crude oil stocks as reported by API yesterday and again this morning by the Energy Information Administration report showing Weekly Crude Stocks declining 3.86 million barrels.

Shrinking inventories combined with global production declines and somewhat positive developments in the US/China trade talks are underpinning prices.

The USDCAD uptrend since October is intact while prices are above 1.3150 but prices are in correction mode today. The post- March 5 rally following the dovish Bank of Canada policy statement and outlook ran out of gas at 1.3465, making triple-top resistance. The subsequent retreat below support at 1.3380 and again at 1.3350 targets the 100-day moving average at 1.3290.

US dollar losses were not just confined to the Canadian dollar. The greenback is modestly lower against the major G10 currencies except for the Japanese yen and New Zealand dollar, which are unchanged after today’s US economic data improved risk sentiment.

Durable Goods Orders rose 0.4% in January, well above the -0.5% forecast, making the third consecutive gain for this data point. Construction spending was better than expected, rising 1.3% compared to 0.4% forecast and Producer Prices were a tad lower than estimated. Together, the data alleviates recession concerns while not giving any ammunition for higher interest rates.

Wall Street liked the data and opened higher. The Dow Jones Industrial Average rose 0.48% as of 14:15 GMT, supported by a bounce in Boeing Corporation (BA: NYSE) shares. Prices are 0.52% higher but at $377.13, BA stock is well below Friday’s close of $422.50.

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