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USDCAD rallied on Friday, heading for the first trading session closing higher since the start of this week. The pair eased weekly losses, as a string of unsatisfying economic data outweighed a rise in oil prices.
Crude prices rose again after dropping in the Asian session. The fact that Saudi Arabia and Iran could not reach an agreement after two-day meeting in Vienna disappointed markets in early trading hours. The outcome of the meeting in Doha earlier this year when Saudi Arabia called off the deal at the last minute, insisting on the participation of Iran, came back to haunt investor memory.
Iran had refused to join the deal at the time, as it saw no reason for a producer, who had just come back from sanctions imposed by the West, to implement any output cut to solve an issue caused by its fellow producer nations/rivals in the OPEC. This time, Iran has almost fulfilled its wish to keep production at pre-sanction levels of 4 million barrels per day.
In a meeting at the headquarters of the Organization of Petroleum Exporting Countries in Vienna, Saudi Arabia has made a huge concession, despite no deal being reached. According to market sources, the OPEC’s largest oil exporting nation has offered an output reduction if rival Iran agrees to cap its own output this year, which is currently at 3.6 million barrels per day.
Although the offer’s details over how much output Riyadh is ready to trim remained unknown, and the offer itself has not been accepted by Tehran, the news has shown the willingness of participants in achieving an agreement that would help reduce or freeze supply and in turn prop up prices.
As a commodity currency, the Canadian dollar received much support following the news. However, data from the country’s internal economy quickly turned the situation upside down. Canada’s core inflation rate in August grew at the slowest pace in two years. Consumer prices excluding volatile items such as food and energy, slowed to 1.8 percent from July’s 2.1 percent on a yearly basis, Statistics Canada said. Compared to the same period last year, the overall inflation rate decelerated to 1.1 percent, from 1.3 percent one month earlier. On a month-on-month basis, both economic indicators made no progress.
Not only did inflation readings lag behind forecasts, Canada’s retail sales were reported to fall 0.1 percent in July, versus an estimate calling for a 0.1 percent increase
Deepening the gloomy economic outlook, Statistics Canada also reported retail sales fell 0.1 percent in July, versus a forecast for a 0.1 percent increase. Core retail sales which strip out automobiles dropped 0.1% in the same period as well.
Fig: USDCAD H4 Technical Chart
USDCAD reversed higher on Friday, moving past both the short-term and long-term moving averages. The pair is facing a tough resistance at 1.31400 which has forced the pair to change direction in previous cycles. The RSI index has just entered the bullish zone. To confirm a solid uptrend, we may need to wait for the pair to escape the uncertain territory around the 1.31400 level.
Buy Digital Call Option from 1.31500 to 1.31700 valid until 20:00 GMT September 23, 2016