USD/CAD Fundamental Analysis – week of December 5, 2016

USDCAD had a pretty bad week as last week was dominated by headlines from the OPEC meeting and the oil prices were the star of the week as it rose by over 20% during the course of the week. Oil prices control the CAD a lot as the Canadian economy depends on the oil prices for its strength. The week began with the USDCAD pair trading near its range highs due to not-so-encouraging news from the various OPEC members who were meeting and discussing on the sidelines of the main meeting. This put the oil prices under high pressure and the CAD also came under pressure.

But as the OPEC meeting got underway, everything fell into place quickly as the OPEC members managed to strike a deal to cut oil production and they also were able to get some non-OPEC members on board. This caused the oil prices to skyrocket and the effect of the meeting continued till the end of the week as the oil prices continue to push beyond $50 and further. This strengthened the CAD and the pair broke down through 1.3300 and rests just below that to end the week.

Looking ahead to the coming week, we have the BOC rate statement where the BOC is expected to keep the rates on hold but the markets will be watching for the statement to see their view on the Canadian economy and look for any hints that the BOC might be looking to cut rates next year, as some economists expect. With the oil prices likely to continue to remain buoyant next week, we can expect the pair to continue to remain under pressure though it has to be said that the uptrend is intact as long as 1.3000 holds. We expect a lot of buying in the region around 1.3200 and so any approach towards that should be viewed as an opportunity to buy for the medium term.