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Loonie gets a break after oil is helped by likely production cuts

Isaac Figueroa

The strong correlation between the loonie and oil is still the primary driver of the USD/CAD’s performance this morning. As seen last week, the USD/CAD was boosted by a weak oil. However, news about OPEC and its allies moving closer to cutting output pushed oil 2% higher in trading overnight.

More, specifically, Saudi Arabia’s Khalid Al-Falih, Minister of Energy, Industry and Mineral Resources, also said his country would unilaterally cut supply by around 0.5 million barrels per day in December and he is trying to persuade other producers to follow. However, Russia—currently the world’s largest oil producer—sent mixed messages on whether it would pull back on supply. On the release side, there is no economic data today.

The technical levels to consider today in the USD/CAD are 1.3189 on the downside and 1.3250 on the upside.

The US dollar index reached a three-month high overnight at 97.58, touching its strongest level in almost 18 months. However, many strategists see the greenback resuming its downtrend in 2019. The greenback was bolstered last week by a decline in US stocks and signals from the Federal Reserve that it doesn’t plan to move away from its plan to increase rates. The US dollar obtained additional incentive Monday as political risks helped drag down the euro and pound. The greenback is still short of the lofty highs of late 2016, early 2017.

On the release side, there is no economic data today, only the Federal Reserve Bank of San Francisco President, Mary Daly, will give her first speech. The remarks will be a first peek into her thinking on the economic outlook and monetary policy as she weighs the effects of further rate hikes.

The technical levels to consider for today for the US dollar index are 97.01 on the downside and 97.58 on the upside. The technical levels to consider today in the USD/CAD are 1.3189 on the downside and 1.3250 on the upside.

Like the pound, the euro is also being hampered by the Brexit; the Euro continues to be weighed down by the Italian budget impasse. Lawmakers in Brussels rejected the first budget proposal put to the EU by the Italian coalition government, so another draft is being prepared in Rome. The budget will likely be the main focus for most of this week as there is no top-tier data of note. Friday sees European Central Bank chief, Mario Draghi, talk at the Frankfurt Banking Congress, so any comments on the Euro Zone economy, rate hikes, or Italy will likely move the shared currency. EUR/USD trades at 1.1268 this morning, but it touched a one month low at 1.1240 overnight.

The technical levels to consider for today for the EUR/USD are 1.1213 on the downside and 1.1311 on the upside. Also, the technical levels to consider for today in the EUR/GBP are 0.8700 on the downside and 0.8743 on the upside.

The sterling has slumped since Friday as ongoing Brexit concerns weigh on the pound. As recently as Wednesday last week, the GBP/USD was close to breaking through the 1.3200 level for the first time since mid-October. We are currently trading at 1.2921, a drop of 347 pips considering the overnight trading lowest’ price, as worries build about whether a deal between the UK and EU can be sorted on time and if a deal is agreed to, whether it will be automatically approved in the House of Commons.

An agreement between the UK and EU is the only driver of sterling crosses at the moment. To highlight this point, Friday saw the release of Q3 GDP from the UK which saw a very buoyant 0.6% registered, as the latter stages of the World Cup and the summer heatwave helped growth hit its highest level Q4 2016. Despite this normally market-moving release, the sterling barely batted an eyelid and in fact, started to fall throughout the afternoon as Brexit worries once again took hold. This week, UK wage growth, CPI and Retail Sales figures will be published; however, politics will be the markets’ primary focus.

The technical levels to consider for today in the GBP/USD are 1.2800 on the downside and 1.2965 on the upside.

The Australian dollar has been trading weakly since overnight, since briefly hitting the 0.7300 handle on November 8th. It has been a downward slide this morning as the dollar reasserts its authority with AUD/USD, which is now back trading at around a 0.7200 handle. Tonight, we have the monthly NAB Business Confidence survey in October.

The technical levels to consider for today in the AUD/USD are 0.7180 on the downside and 0.7237 on the upside.

The kiwi is still in consolidation this morning. As USD buying forces up the greenback’s price, the NZD still has some fuel after good economic data was released last week. Throughout November, the NZD/USD has risen from 0.6517 and broke through 0.6600 last week as strong local data, notably last week’s drop-in unemployment, bolstered the local buck. We are trading at 0.6750 at this moment.

The technical levels to consider for today for the NZD/USD are 0.6690 on the downside and 0.6850 on the upside.