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Are Loonie Shorts About To Come Apart At The Seams?

As the Canadian dollar futures reach resistance, the COTs positioning suggests a bullish sentiment extreme may be in the cards.

Candian Dollar Overview

As of last Tuesday the Canadian dollar finally saw Large Traders Net Long (as represented by the top indicator crossing above the zero line). So does this confirm a long-term buys  signal? Not necessarily, if we look at the indicator below. 

The bottom indicator shows the ratio between Longs vs Shorts and between Large Traders and Hedgers.

Green Line: Large Traders Longs vs Shorts RatioBlue LIne: Hedgers – Long vs Shorts Ratio

The idea of this indicator is to suggest a sentiment extreme, based on the assumption that Large Traders (Speculative Hedge Funds etc.) tend to be trend traders, and are on the correct side of the market during trend. However if too many are on the same side then there is risk of a trend reversal.

The same can be said for Hedgers, who tend to be on the ‘wrong’ side of the market during trends but find themselves on the ‘correct’ side of the market during turning points. We can see that when both Large Traders reach the 100th percentile of 26 weeks and hedgers reach the 0 percentile over 26 weeks there has been a reversal within weeks. 

Being a weekly chart, and using data that is delayed by over 1 week it does not generate trade signals itself but merely helps us assess how much fuel may be left in a move and suggest a sentiment extreme has been reached. These extremities can last for weeks and sometimes months, but it does provide a warning to us at least. 

Also note that at the time of writing we see the same ‘sentiment extreme’ signal on the 52-week percentile.  

So whilst we have a warning signal, we still need to use price action as our confirmation. 

USD/CAD Weekly Chart

USD/CAD is now testing a bullish trendline form the Sep ’12 lows with the Weekly close being a Rikshaw Man Doji to warn of sideways trading. Price hovers around the 38.2% trendline but notice how the 50-week sMA and eMA are close by at 1.0723-25 which may act as interim resistance.

Remember that COTs are a long-term signal so it does not mean we will not see further lows, in which case we do have several layers of support between 1.056-1.06 which may be tested before a trend reversal.

USD/CAD Daily Chart

However the main message of this post is to highlight that the bearish movement may be coming to an end over the coming weeks, and this leaves us open to messy price action as the ratio between bulls and bears readjust their positions. 

Any moves up to 1.70 may entice bearish swing traders, so I would prefer to step aside form the bullish side until 1.70 is broken. 

AUD/USD’s Copper Correlation Could Be Catastrophic

Last week we looked at the weakening correlation between the value of the Canadian dollar and oil prices, noting that, “It seems unlikely that this typically tight correlation has broken on a sustainable basis, so it will be interesting to see whether oil sees a notable bounce next week or whether the loonie depreciates meaningfully to “catch down” with the recent fall in black gold”. While we haven’t seen a resolution to that pergence yet, there is another currency pair/commodity correlation that may come to the fore this week.

The Australian dollar is generally closely correlated with base metals such as iron ore and copper and while the former has managed to stabilize over the last few weeks, copper has continued to tumble. Earlier today, copper dropped below $5,000 per metric ton in London trading. Beyond representing a significant psychological level, this is also the lowest price for the metal since the Great Financial Crisis in 2009. From a fundamental perspective, much of the recent decline can be chalked up to fears about China’s economy, which has recently slowed down to “just” 7.0% growth in the official numbers, though many analysts suspect the economy is actually growing at an even slower rate.

If copper is unable to recover from its big breakdown, it would bode ill for the Australian dollar. Last night’s RBA minutes showed that the central bank is firmly on hold, though it appears that the central bank wouldn’t mind seeing continued depreciation in its currency. To wit, the minutes noted that, “it was likely that financial market volatility would increase and the US dollar could appreciate further, including against the Australian dollar” if and when the Federal Reserve raises interest rates. The minutes also stated that China’s “policy response to the recent volatility in Chinese equity markets had clouded the medium-term economic outlook” for Australia’s economy.

At this point, the key technical level to watch on AUD/USD (left axis) is .7250, which represents previous support from earlier this month and late July. Especially if the price of iron ore starts to edge lower as well, the Aussie could retest or break this key support level later this week. Meanwhile, a recovery in copper may alleviate one bearish catalyst for AUD/USD, but without any bullish fundamental news, the pair could still remain rangebound below .7400-50.

Copper (Blue), AUD/USD


*NOTE: Correlations can change, and there are other factors beyond the price of copper that impact AUD/USD.

Canadian Dollar: A Pausing Bear Or An Ending Correction?

Bottom Line

The Canadian dollar has sold off significantly since putting in the 2011 high. But, in order to understand what the market is telling us, we must first make a determination as to when the high was made. There are at least two scenarios that can be considered and based on which is chosen, the recent price action can be that of a bear market or a correction ending in a bull market.

The Monthly Chart

CAD/USD Monthly Chart

I am considering two scenarios on the monthly chart. The first (Scenario 1) places the market high in Nov 2007. The second scenario (Scenario 2) places the high in Jul 2011. The importance of making this distinction is so that the correct period of ADX (S1 or S1) can be used in making the determination of if/when the -DI may take out the +DI.

If Scenario 1 and S1 is used for the high, then the -DI has yet to take out the +DI. In this scenario, the price action since 2007 would be that of a correction.

If Scenario 2 and S2 is used for the high, then the -DI has taken out the +DI of the peak. In this scenario, a bear market began in July 2011 and has only taken brief pauses to-date. With price, the 26 period RSI, and the +DI perging (A), a signal of a possible substantial correction could be staging. Should the ADX begin to turn down (B), then a correction could be likely.

The Weekly Chart

CAD/USD Weekly Chart

The price action on the weekly chart remains bearish. However, there are several indicators that are signaling a potential correction

  • The 7 period EMA has almost converged with the 26 period as well as price breaking above the 26 period EMA
  • The 26 period RSI dropped below 30 with low price movement
  • The ADX continues to fall along with the convergence of +/-DI

It should be noted that these conditions had previously occurred in Feb 2015. However, soon after the market turned down again.

The Daily Chart

CAD/USD Daily Chart

Since Nov 2015, the market has been in a nice downtrend (A). Off of the low placed on Jan 20th, the market has retraced nearly all of the down move. Significant points of interest from this low:

  • The 7 period EMA crossed up over the 26 period and has held
  • The 26 period RSI has crossed up over 50 and has held
  • The +DI crossed over the -DI and the ADX has remained above 20

Some additional items to consider:

  • The 26 period EMA is in the process of crossing the 90 period
  • Price has crossed above all 3 EMA period
  • The 26 period RSI is pushing toward 70
  • The +DI has not taken out the -DI of the low price (C)

Of these additional items, the last, to me, is one of the more important ones. The +DI is mostly flat and has not taken out the -DI signaling that for now, the down trend on the daily chart is still intact.

The Hourly Chart

CAD/USD Hourly Chart

The hourly chart’s price movement has played well off of the 90 period EMA. An interesting aspect of the chart is the action of the ADX in conjunction to the +/-DI (A). Since March 2nd, the ADX has trended either below 20 and/or the +/-DI indicating a consolidation. With this setup, we can look for price patterns along with lines of support/resistance. With these two lines (A), we now have targets to watch for price movement to break out of.

Summary Considering the monthly and weekly charts, there doesn’t appear to be a reasonable trade at this time. The daily chart seems to indicate that a pullback is in play but it’s not clear the magnitude of the pullback. The hourly chart appears to indicate that the pullback may be at a point or correction itself.

Time will have to let the weekly and daily charts evolve to determine what type of correction is in play. As of now, the plan is to stand aside and let the market indicate what a plan of action will be for a longer term trend trade.

What to Watch On the weekly chart:

  • Can the 7 EMA break through and be supported by the 26 period
  • Can the e26 period RSI push up to and hold the 50-60 range
  • The ADX continues to drop and the +DI crosses up over the -DI

On the hourly chart:

  • Does price break below the lower of the two trend lines (A) or push through the upper
  • Should price break below and price hold above the point of the Jan. 28th low, then a short term upside trade may be possible as a larger correction plays out

Canadian Dollar Higher, Markets Await FOMC Meeting

The Canadian dollar has posted gains to start off the week, erasing the losses which marked the Friday session. Early in the North American session, USD/CAD is trading at 1.3160. On the release front, the sole US event is the NAHB Housing Market Index. There are no Canadian releases on the schedule. On Tuesday, the US will release Building Permits, a key event.

The Canadian dollar slipped 1.0% last week, as USD/CAD pushed above the 1.32 level on Friday. As the Canadian currency is sensitive to the price of oil, a sharp drop of 5% in crude oil prices last week weighed on the struggling loonie. A recent report from the International Energy Agency (IEA) said that the global oversupply of oil, which has weighed on oil prices, could extend into the middle of 2017. If oil prices continue to drop, the Canadian dollar could continue to lose ground.

US releases ended the week on a positive note, as August consumer inflation was a bit better than expected. CPI posted a gain of 0.2%, edging above the forecast of 0.1%. It was a similar story with Core CPI, which rose 0.3%, compared to the forecast of 0.2%. CPI was up from 0.0% in July, with the rise being attributed to higher shelter and health care costs.

If inflation indicators continue to rise, there is a greater chance of a rate hike in December, and increased speculation about a Fed hike could push the greenback to higher levels. The Federal Reserve will hold a policy meeting on September 21, and a rate hike is considered extremely unlikely, with a hike priced in at just 12 percent.

Ever since an upbeat speech from Janet Yellen in August, the markets have been speculating about the timing of the next Fed rate hike. However, recent economic numbers have been mixed, so the Fed is expected to remain on the sidelines on Wednesday, when it sets the benchmark rate. However, the Fed statement will be of intense interest, and the markets will be looking for clues regarding a December move.

If Janet Yellen delivers a dovish message, the market’s mood could sour and the dollar could lose ground. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains pided regarding its near-future monetary policy. Will the rate picture clear up or remain fuzzy after the rate statement?

USD/CAD Fundamentals

Monday (September 19)

  • 14:00 US NAHB Housing Market Index. Estimate 60 points

Tuesday (September 20)

  • 12:30 US Building Permits. Estimate 1.17M

* Key releases are in bold

*All release times are EDT

USD/CAD for Monday, September 19, 2016

USD/CAD Sep 18 – 20 Chart

USD/CAD September 19 at 8:40 GMT

Open: 1.3200 High: 1.3203 Low: 1.3134 Close: 1.3166

USD/CAD Technical

  • USD/CAD posted considerable losses in the Asian session and is flat in European trade
  • 1.3120 is a weak line
  • 1.3253 is a strong resistance line

Further levels in both directions:

  • Below: 1.3120, 1.3028 and 1.2922
  • Above: 1.3253, 1.3371 and 1.3457
  • Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Monday session. Currently, short positions have a strong majority (68%), indicative of trader bias towards USD/CAD continuing to lose ground.

Original post

Canadian Dollar Hiked As OPEC Reaches Agreement

The Canadian dollar received a positive shock yesterday, as OPEC reached an agreement and traders reacted with confidence with strong demand on the Canadian dollar.

USD/CAD dropped from 1.3269, scoring a record low since 26th Sep 1.3046. USD/CAD intraday 1.3093, still below it’s daily pivot 1.3141 which indicates a bearish continuous trend for the coming hours and Canadian dollar moving strengthen against U.S. dollar.

USD/CAD trading price will be clearer today after the U.S. releases it’s final GDP q/q and Unemployment Claims at 1:30 PM GMT and the full picture tomorrow as Canadian GDP m/m will be published at also at 1:30 PM GMT 30 Sep.

Key levels to watch: Daily PP 1.3141.

First support 1.3074, S2 1.3040, S3 1.3017, S4 1.2996 on four hour charts.

First resistance R1 1.3108, R2 1.3135, R3 1.3164, R4 1.3181 on four hour charts.

Trend: Bearish.

Remark: USD/CAD is expected to trade between R1 and S2. Look forward for today’s U.S. GDP and Unemployment Claims at 1:30 GMT, later on tomorrow 30 Sep at 1:30 PM GMT as Canadian release the GDP m/m, also.

Canadian Dollar Lower As OPEC Deal Questioned

The Canadian dollar depreciated on Thursday erasing the gains from a day earlier when the Organization of the Petroleum Exporting Countries (OPEC) announced an oil output cut surprising the market who was expecting a freeze. Doubts about the details of the agreement are keeping the price of oil from rising higher and have put pressure on the CAD that awaits Friday’s Canadian GDP figures for the month of July.

Comments all week from U.S. Federal Reserve members have made an interest rate hike this year very likely. Fed Presidents Loretta Mester and Dennis Lockhart both made comments supporting an interest rate, with Philadelphia President Patrick Harker focusing more on the impact of trade. Fed Chair Janet Yellen testimony in Washington continued to include no new information on the rate hike cycle, but understandably was concerned with regulation and oversight after the Wells Fargo (NYSE:WFC) scandal.

The Final U.S. GDP data for the second quarter delivered positive news for the USD with a higher than expected 1.4% percent growth beating the forecast of 1.3 percent based on the two previous estimates. Unemployment claims rose last week by 3,000 for a 254,000 claims but still under the anticipated 260,000. The job market has been the strongest pillar of the U.S. economic recovery, but as the market gets closer to full employment there are more questions about the quality and wages of the jobs that have replaced those lost after the 2008 crisis.


The USD/CAD lost 0.428 percent in the last 24 hours. The pair is trading at 1.3155 after the CAD rally ran out of steam at the 1.3050 level. Doubts on the OPEC strategy and its execution and vigilance of production quotas slowed down the appreciation of oil and reversed most of the gains for the Canadian currency versus the dollar.

The Bank of Canada (BoC) has stood on the sidelines for most of 2016 opting for the Federal government to try and do the heavy lifting to spark economic growth with fiscal stimulus. Announced in March and with an update expected in November the fiscal stimulus package has not been enough to spark growth and is now facing revenue challenges. The Finance department conducted a survey of economists that forecast a $50 billion drop in nominal output. A new round of stimulus is needed to help the Canadian economy overcome the drop of natural resource prices but it might prove to be a difficult political proposition. The BoC has said it is ready to act, but the runway is small on the interest rate front with 0.50 and with other options like negative rates and quantitative easing mentioned.

West Texas Oil

West Texas rose 1.654 percent in the last 24 hours. The price of crude is trading at $47.13 after the OPEC announced an oil production cut in their meeting in Algiers. There are question marks about the finer details of the agreement and they will be addressed in the official November meeting of the organization in Vienna.

Now although producers have agreed to agree, avoiding the fate of the Doha meeting it seems Saudi Arabia has had to compromise and is losing its unquestioned leadership of the group. Iraq apparently was not happy with the agreement and has become the number two crude producer as Iran was under sanctions for its nuclear program. Another factor limiting the impact of the announcement is that part of the strategy in achieving market share through record high levels production would keep shale producers out of the market, and if OPEC’s plan starts rising prices, it will also do it for competitors. Supply continues to be disconnected from the global demand for crude which has shown unusual patterns during the summer.

Market events to watch this week:

Friday September 30 4:30am GBP Current Account 8:30am CAD GDP m/m 9:00pm CNY Manufacturing PMI

Original post

USD/CAD: Canadian Mfg. Sales Sparkles, U.S. Inflation Mixed

The Canadian dollar has posted slight gains on Tuesday, as the pair trades at 1.3080. The currency continues to rally, as USD/CAD has dropped 200 points in less than a week. On the release front, Canadian manufacturing sales jumped 0.9%, well above the forecast of 0.3%. South of the border, US CPI edged upwards to 0.3%, matching the forecast. Core CPI dipped to 0.1%, shy of the forecast of 0.2%. On Wednesday, the BoC will make its rate announcement, while the US releases Building Permits.

Canadian Manufacturing Sales impressed in August, posting a sharp gain of 0.9%. This marked a 4-month high and points to stronger activity in the manufacturing sector, which has struggled in a weak global economy. Over in the US, consumer inflation numbers were mixed. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier.

These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 64 percent. Meanwhile, US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UofM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.

The Bank of Canada will meet for its monthly policy meeting on Wednesday. The markets are expecting the benchmark rate to remain at 0.50%, where it has been pegged since May 2015. With the Canadian economy under-performing, there is little chance of a rate hike in the near future, so monetary pergence will continue to favor the US dollar over its Canadian counterpart. Canada will release CPI numbers on Friday, and the markets are expecting stronger numbers for September, which could fuel further gains for the loonie.

USD/CAD Fundamentals

Tuesday (October 18)

  • 8:30 Canadian Manufacturing Sales. Estimate 0.3%. Actual 0.9%
  • 8:30 US CPI. Estimate 0.3%. Actual 0.3%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
  • 10:00 US NAHB Housing Market Index. Estimate 64 points
  • 16:00 US TIC Long-Term Purchases

Wednesday (October 19)

  • 8:30 US Building Permits. Estimate 1.17M
  • 10:00 BoC Monetary Policy Report
  • 10:00 BoC Rate Statement
  • 10:00 BoC Overnight Rate. Estimate 0.50%
  • 11:15 BoC Press Conference
  • 16:15 BoC Governor Stephen Poloz Speaks

*All release times are EDT

*Key events are in bold

USD/CAD for Tuesday, October 18, 2016

USD/CAD Oct 18 – 20 Chart

USD/CAD October 18 at 8:45 GMT

Open: 1.3115 High: 1.3117 Low: 1.3053 Close: 1.3076

USD/CAD Technical

  • USD/CAD was flat in the Asian session. The pair posted slight losses in the European session. The pair posted considerable losses in North American trade but has rebounded
  • 1.3028 is providing support
  • There is resistance at 1.3120

Further levels in both directions:

  • Below: 1.3028, 1.2922 and 1.2815
  • Above: 1.3120, 1.3253, 1.3371 and 1.3457
  • Current range: 1.3028 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to short positions with a majority of (52%), indicative of slight trader bias towards USD/CAD continuing to move to lower ground.

Original post

Poloz Whipsaws USD/CAD, But Still Set To Breakout

The Canadian dollar is in focus today as Governor of the Bank of Canada, Poloz testified before the House of Commons Standing Committee on Finance in Ottawa,

We have to weigh the risks of waiting longer against what are the costs associated with doing something more immediate, our best plan right now, we think, is to wait for the next 18 months or so.

Very standoffish indeed and you can see why the CAD immediately rallied as the quotes first hit.

USD/CAD 5 Minute:

USD/CAD 5 Minute Chart

But as so often happens, sanity prevails as markets realise that these sorts of speeches are just full of empty rhetoric that has been said 100x before and we’re back on track in line with the technicals.

We normally take a look at USD/CAD alongside oil due to their obvious correlation. But with today’s Poloz speech doing the damage we’ll let the pair stand on its own two feet.

USD/CAD Weekly:

USD/CAD Weekly Chart

The weekly highlights the obvious bullish trend that price has been rocketing north within for a good five years or so. The fact that it’s gone basically vertical is a little bit of a risk for bulls, as you can see by that pullback off its highs twelve months or so ago.

But while not quite pulling back to the original trend line, price has printed a new parallel line just above it which has held and given a bit of a bounce.

USD/CAD Daily:

USD/CAD Daily Chart

Zooming down into the daily chart where we can see today’s price action on the back of Poloz’s speech testing the upside of the short term channel.

I quite like the bullish nature of this test because it’s in the direction of the major trend and there seems to be some nice momentum behind the move if this 5 minute retrace is anything to go by.

On the Calendar Tuesday:CAD BOC Gov Poloz Speaks EUR German Ifo Business Climate

USD CB Consumer Confidence GBP BOE Gov Carney Speaks EUR ECB President Draghi Speaks

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USD/CAD Higher As Oil Higher And Trump Under Investigation

The Canadian dollar gained on Friday agains the US dollar as oil prices moved higher by 0.577 percent and the political drama surrounding the Trump administration could result in the President of the US be the target of an investigation of the interference of Russia in the US elections.

The loonie got a boost from the Bank of Canada (BoC) policy makers who made hawkish comments about the Canadian economy and dropped strong hints that a rate hike could come sooner rather than originally expected by markets. The BoC’s last change in the benchmark rate came in July 2015 as the second rate cut that year down to 0.50 percent. Improving economic indicators and a concern for household debt rising even more have prompted the central bank to signal a possible rate rise to keep the gap with the Fed from growing too large.

USD/CAD June 12-16 Chart

The USD/CAD lost 1.411 percent in the last five days. The currency pair is trading at 1.3241 after comments from the Bank of Canada (BoC) Deputy governor put a rate hike firmly on the table. Governor Stephen Poloz followed up on the comments the next day and confirmed the optimism on the growth of the economy and the possible reduction of stimulus going forward.

The loonie rallied until the U.S. Federal Reserve delivered its own optimistic view on the American economy while hiking rates for the second time this year. The hike was not enough to offset the negative indicators delivered this week that contradict the picture painted by the Fed’s forecasts.

The CAD advanced despite little support from oil prices who suffered from another surprise buildup, this time in gasoline stocks. The battle to stabilize crude prices between the Organization of the Petroleum Exporting Countries (OPEC) and US producers continues to show the glut of energy products remain.

The biggest risk for the Canadian dollar remains a political one. The renegotiation of the NAFTA is scheduled for late August and a negative outcome could reshape the Canadian economy for the worse. The turmoil in the Trump Administration has taken some of the pressure off, but the consultation process needed before renegotiation was initiated as anticipated and the soft lumber tariffs to Canadian producers sent a strong message ahead of sitting down at the negotiation table.

Market events to watch this week:

Monday, June 19 9:30pm AUD Monetary Policy Meeting MinutesTuesday, June 20 2:30 am CHF SNB Chairman Jordan Speaks 4:45 am CHF SNB Chairman Jordan SpeaksWednesday, June 21 10:30 am USD Crude Oil Inventories 4:00 pm NZD RBNZ Rate Statement 5:00 pm NZD Official Cash RateThursday, June 22 8:30 am CAD Core Retail Sales m/m 8:30 am USD Unemployment ClaimsFriday, June 23 8:30 am CAD CPI m/m

Original post

Canadian Dollar Lower After Oil Drops To 10-Month Low

The Canadian dollar depreciated versus the US dollar on Wednesday as the price of oil continued falling despite a higher than expected drawdown in weekly US crude inventories. U.S. Federal Reserve speakers continue to bolster the possibility of at least one more rate hike in 2017 and the start of its balance sheet reduction program, while the hawkish words of the Bank of Canada (BoC) policy makers are now lost in last week’s headlines.

Canada will release retail sales data on Thursday, June 22 at 8:30 am EDT. Analysts are forecasting a rise of 0.6 percent in the core reading after last month’s contraction. Adding the volatile auto sales that grew 3.2 percent in March the overall gain was 0.7 percent as clothing sales and convenience stores offset the gains in the auto sector. Economic indicators have been positive which lead the comments from the BoC about the growing momentum opening the possibility of a rate hike this year.

The USD was mixed against major pairs with most of the gains coming off versus commodity currencies affected by the fall in energy prices. The loonie was the most affect falling 0.42 percent, but followed closely by losses in the AUD and NZD. European pairs moved higher versus the greenback with only the JPY close to flat on Wednesday’s trading. The economic calendar does not offer much support for the USD outside of Fed speaker speeches that keep stoking the fire of a third rate raise in 2017.

USD/CAD Chart For June 21

The USD/CAD gained 0.432 in the last 24 hours. The currency pair is trading at 1.3313 with the CAD failing to catch a break this week. Lower than expected inventories were not enough to convince markets oil should be priced higher. The changes in the Saudi hierarchy could spell an escalation of diplomatic and non-diplomatic tension between Iran and Saudi Arabia which could tear the Organization of the Petroleum Exporting Countries (OPEC) apart, specially after the action against Qatar. T

The high correlation with oil has put downward pressure on the loonie and most reports around NAFTA are hardly encouraging as the relationship with Canada’s largest trading partner could change if the US follows its America First doctrine. The CAD will have to depend on the retail sales data for direction as Fed speakers continue to prepare markets for an eventual rate hike later this year.

West Texas Oil Chart for June 21

Oil price fell 2.261 percent in the last 24 hours. The price of WTI is trading at $42.29 as the market is full of supply concerns with rising animosity between OPEC partners offsetting the high compliance of the production cut agreement yet with few results to show for it. Iran hinted today that the group could be working on deeper cuts, only for those comments to be dismissed by other oil producers in the group. The Energy Information Administration (EIA) released a deeper than expected drawdown of 2.5 million barrels when 1.2 million were forecasted. Gasoline stocks surprised with a drawdown of 600,000 barrels but not enough to offset the reality of over production specially with Libya and Nigeria resuming their production at full force.

Saudi Arabia’s King Salman shook up the kingdom’s hierarchy as he put his son Mohammed bin Salman as next in line to succeed him. The 31 year old replaces his cousin and has been a rising star in Saudi politics and economy as he is also in charge of bringing the kingdom out of its dependancy to energy which is easier said than done. His appointment raises the stakes as to when a new confrontation will happen with Iran who sits in the other spectrum of OPEC membership. If the embargo on Qatar by other Arab states is any indication it could escalate rather quickly as Saudi Arabia wishes to have closer ties to the US and Russia.

The showdown between US shale producers and OPEC members continues and with stagnant demand for energy around the globe, prices have been caught in a tight range with only big supply disruptions having an impact, only to be cancelled once they get sorted.

Market events to watch this week:

Thursday, June 22 8:30 am CAD: Core Retail Sales m/m 8:30 am USD: Unemployment ClaimsFriday, June 23 8:30 am CAD: CPI m/m

Original post