Supported By Oil, Loonie Takes Off
After Saudi Arabia and Iran, both major producers of OPEC seemed to be unwilling to freeze their production at January levels, Russia, whose economy is tumbling into recession due to the slump in energy prices, decided to raise its voice to boost last week’s deal.
On Thursday, Russia’s Energy Minister Alexander Novak reiterated that Russian monthly production this year will not surpass January’s output of 10.84 million barrels per day. He expected that the four countries including Venezuela and Qatar, can reach the historic agreement before March.
A negotiation between Russia and Iran in next month is expected to bring out some result, although it is quite hard to persuade a country which just has been liberated from sanctions to hold back its potential 1-million-bpd plan.
The speech from Russia supported crude last night in the U.S session, pushing WTI and Brent oil price up more than 3% to above $33 and $35 per barrel, respectively. Although has been trading much lower than its two counterparts, Western Canadian Select, the benchmark for Canadian crude, trimmed the losses today.
The recovery in energy price has help boosting commodity currencies, especially the Loonie, as about 10 percent of Canadian economy comes from energy sector.
At 1:30 P.M GMT, U.S Bureau of Economic Analysis will report the Preliminary GDP for Q4/2015. The broadest measure of economic activity, which is also the primary gauge of the economy’s health, is forecast to hit 0.4 percent in the second estimate, down from the 0.7 percent number released as the advance reading.
At the same time, other important data including January Core PCE – the Fed’s preferred measure of inflation and Personal Spending for the same period, is due to be published. The forecast still stands at 0.1 percent, with no sign to move closer to its government’s target of 2 percent.
In late U.S session, Federal Reserve Governor and also FOMC voting members Lael Brainard and Jerome Powel will be speaking. An interest rate hike delay in March is strongly expected by the markets, as the CME Group Fedwatch index is only at 6.2%. Any dovish comment from Fed officials today could lower the U.S dollar against its peers.
Fig: USDCAD Weekly technical chart
The Loonie is heading toward the 6 consecutive week closing lower. This is the longest slump of the currency pair since 2009, pushing the U.S dollar down more than 8% against its Canadian counterpart, after hitting the high of 1.46963.
The price is about to reach the 23.6 Fibonacci retracement and closer to the MA 50. As can be seen from the chart, this level is quite strong as it acted like a resistance in the last September. If breaks successfully out of this support, the price may go lower to the 38.2 level at 1.27514.
Sell at 1.35230, Stop loss at 1.35390, Take profit at 1.34355.