Overnight Range 1.3163-1.3210        

Oil prices soared overnight. Non-Opec oil producing nations, Russia, Mexico, Kazakhstan, Azerbaijan, Sudan and Oman agreed to cut production to the tune of 558,000 barrels/day. Saudi Arabia announced a willingness to make additional reductions  to their previously announced production cuts. “This agreement cements and prepares us for long term cooperation” said Saudi Oil Minister Khalid Al-Falih.  The UAE also agreed to a lower production cap.

WTI gapped higher in Asia, rising from $51.36 (Friday close) to $54.48 before slipping lower in Europe.The oil rally rise kicked off a commodity currency bloc rally with Aussie, Kiwi and the Loonie all gaining. USDJPY climbed steadily rising from 115.14 to 116.10, largely due to pre-FOMC meeting positioning.

EURUSD was in demand from the start.  The single currency rose from an Asia low of 1.0526 to 1.0625 in early New York trading. The move may have been an element of “sell the rumour, buy the fact” in it. The ECB meeting is in the history books and the FOMC meeting soon will be. The odds of a US rate hike are at 95% and fully reflected in prices.

Sterling was choppy but in the end GBPUSD rallied.  It opened in New York at the high for the overnight session. Brexit issues and positioning are the key drivers of the currency.

The Canadian dollar is feeling rather frisky. The addition of non-Opec nations into the production cutting fraternity has lifted oil prices above major resistance levels suggesting further gains are likely.

That has made long USDCAD positions extra-vulnerable to large losses with a break of support in the 1.3070-90 area.   This precarious position is made worse due to reduced liquidity due to pre-Christmas/year end markets.

There isn’t much in the way of data today. The near-certainty of a Fed rate hike and the uncertainty posed by the incoming Trump presidency suggests that Wednesday’s FOMC meeting may be anti-climactic- no surprises and “cautious” talk.  For today, that means that oil price movements will be the tail wagging the FX dog.

USDCAD Technical outlook

The intraday USDCAD technicals are bearish while prices are below 1.3150.  A move above this level would lead back to 1.3190, filling the overnight gap. The end of November downtrend line remains intact while trading below 1.3240.  A break of major support in the 1.3070-90 area representing uptrend line support from May and the 200-day moving average would extend losses to 1.3020, opening the door to a deeper correction to 1.2880.

For today, USDCAD support is at 1.3110 and 1.3070.   Resistance is at 1.3150 and 1.3190

Today’s Range 1.3070-1.3170

Chart: USDCAD daily