USD/CAD – Canadian Dollar Jumps as OPEC Production Cuts Kick In

The Canadian dollar has posted strong gains in the Wednesday session. Early in the North American session, USD/CAD is trading slightly above the 1.33 line. On the release front, today’s highlight is the Federal Reserve minutes from the December meeting. There are no Canadian events on the schedule. On Thursday, the US releases ISM Non-Manufacturing PMIs and two key employment indicators – ADP Employment Change and Unemployment Claims. We’ll have to wait until Friday for major Canadian events, with the release of key employment releases.

The markets are eagerly awaiting the release of the Federal Reserve minutes from the December policy meeting. At that meeting, the Fed finally raised rates for the first time since December 2015. Analysts will be combing through the minutes, looking for clues regarding future monetary policy. The US economy is performing very well, and the markets are hopeful that this continues as Donald Trump takes office. Trump’s economic policies remain sketchy, although he has promised to increase fiscal spending while lowering taxes. If the economy’s positive momentum continues, the Fed could be inclined to raise rates another quarter point in order to prevent the economy from overheating. If the markets remain bullish about further rate hikes, the US dollar could continue to climb in early 2017.

Could the OPEC production deal be a godsend for the Canadian dollar? The commodity-based currency sagged in the second half of December, but has dropped below the 1.33 line for the first time since December 16. In December, OPEC surprised the markets as members agreed to cut or limit production levels. This was quickly followed by a deal with Russia and other oil producers to cut production. These reductions took effect on January 1. If oil exporters don’t cheat on their quotas and production levels drop, crude prices and the Canadian dollar should move upwards.

USD/CAD January 4 at 8:45 EST

Open: 1.3420 High: 1.3457 Low: 1.3292 Close: 1.3317

USD/CAD Technical

S1 S2 S1 R1 R2 R3
1.3003 1.3120 1.3253 1.3371 1.3457 1.3589

USD/CAD posted slight gains in the Asian session but reversed directions in European trade and dropped sharply
1.3253 is providing support
1.3371 has switched to a resistance line after sharp losses from USD/CAD

Further levels in both directions:
Below: 1.3253, 1.3120 and 1.3003
Above: 1.3371, 1.3457, 1.3589 and 1.3759
Current range: 1.3253 to 1.3371

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