The Canadian economy which is depending mainly on exporting the raw material and specially the crude oil to US is looking improving following the US recovery unfazed of the retreating of the Chinese pace of growth, the struggling EU economy and also the Japanese shrinking.

The Canadian dollar could be boosted by the end of last week with increasing demand for commodities and energy following PBOC’s decision to lower the interest rate by 0.25%.   

USDCAD has fallen below last Tuesday low at 1.1261 reaching 1.1192 by the end of the week, before closing it at 1.1231, After Oct CPI rose by 2.4% y/y, while the consensus was referring to surging by 2.1%, after soaring by 2% in September and also Oct BOC Core CPI which excludes the food and energy climbed up by 2.3% year on year while the median forecast was increasing by 2.2%, after growing by 2.1% in September, as the same as BOC inflation expectation of watching it between 2% to 3% yearly.

From another side WTI could reach $77.79 per barrel before setting back to close at $75.65 per barrel ahead of the outcome of the OPEC members meeting next Thursday by God willing with increasing expectations of having output cut.

While the global economic growth is watching slowdown currently with falling of the inflation and growth expectations in EU and also in China to lead its central back to cut the interest rate for the first time since 2012, while Japan is watching persisting GDP contraction for the second quarter, after raising the sale levy in the beginning of this financial year.

From another side, there are increasing worries about the impact of this winter on the US economy which has actually shrunk by 2.1% in the first quarter of this year, after aggressive winter but these worries can help the Canadian dollar also as this can be with more demand for oil from Canada.

Anyway, The loonie is still well-supported by rising expectations of following the US economic recovery, afterOct Canadian labor report has come with net employment change rising by 43.1k following rising by 74.1k in September with unemployment declining to the lowest level since November 2008 to 6.5% from 6.8% in September and it is waiting now for OPEC to prove that it can take action against the recent aggressive falling of prices by cutting the supplies next Thursday.

If OPEC is not to do so, it can be met by missing trust in its ability to prop the prices up and this can lead to acceptance of much weaker prices on the OPEC failure in this simple exercise amid inflation weakness in the G7 economies can pave the way to approval of such convincing action, after falling of the global demand and inventory building up in US which is having the most healthy economy among the G7 to be fueled by more energy.

It is really not easy to find a solid floor of the oil prices, if the OPEC failed to take such action.

God willing in the case of declining further below 1.1192 whereas it has stopped falling by the end of last week, it can meet lower supporting level at 1.1165, before 1.1120 by 1.1070 which supported it on last Oct. 2, before 1.10 psychological level which can fall to open the way to another support at 1.0885

But rising up can be met by resistance at 1.1370 before 1.14 before its top at 1.1467 which has been formed on the fifth of this month as the highest reached level since July 2009, before 1.15 psychological level which can open the way to 1.168 before its formed lower high at 1.1725 which came beneath its formed top at 1.1812 on May 2009.

While the pair is meeting its daily 50 moving average after getting below its daily 20 moving average showing that it’s under lower technical pressure currently.

Kind Regards
 

FX Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

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