USD/CAD Slips As Tightening Crude Inventory Supports CAD
May, 12th 14:11
The Canadian dollar has reversed some of the week’s earlier losses after the release of the U.S. crude inventories at 10:00 am EDT on Wednesday. The Energy Information Administration (EIA) issued the latest weekly report that showed a shrinking of inventories by 3.4 million barrels in the week ending May 6, against expectations of a 0.714 million barrels increase, while output fell 0.261% to 8.802 million barrels.
The shortfall in crude drove energy prices higher and in turn took the CAD along for the ride. USD/CAD hit a low of 1.2843, last seen on Friday last week.
The correlation between the price of oil and the Canadian dollar is strong. The loonie will remain volatile along with oil prices as the Alberta wild fires rage on, and an oil production freeze almost seems impossible at the Organization of the Petroleum Exporting Countries (OPEC) meeting next month.
On Thursday, the US dollar dropped against the basket of major currencies after 7 consecutive days of gains, as investors locked in profits on a day with no major US economic data. The greenback fell for a third day against the loonie as a rally in oil, bolstered currencies of commodity-exporting nations. Moreover, the USD has also faced downward pressure as global stock markets slump.
Fig. USDCAD D1 Technical Chart
On the daily chart, we observe a slight fall to 1.28419. The USD is tracing a down-move against the CAD after this pair tested the support at 1.30170, three days ago. The ADX is 28.00, with DI- staying above DI+, indicating a strong selling power. USD/CAD is expected to continue falling before approaching the resistance level at 1.26987.