CAD looks Vulnerable on weak crude
|President Trump's decision to walk away from the Paris Climate Accord is likely to result in additional oil production. This is not supportive of oil since recent reports indicate that OPEC nations - that are exempt for production cuts - have started to increase production. According to a Bloomberg report, total OPEC production increased by 315k barrel/daily to 32.21mln.
In addition, softness in 1Q US suggests that the demand backdrop is not as supportive as originally anticipated. With oil at already low prices, it is difficult to visualise further weakness. However, sustained $48 brl oil ($45-$55 range) will drag certain economies down. Canada and Mexico run external deficits at this oil prices range so an extend period of weakness will only worsen balances. Further erosion in economic positions is likely to hurt their currencies. In addition, with CAD negative carry with USD will pressure traders to quickly liquidate positioning given the choice.
Stay on top of the markets with Swissquote’s News & Analysis
On the other hand, Russia and Norway as oil exporters can generate current account surpluses and support mid-term currency strength. From a trading perspective we suspect the RUB is overbought and comments from the central bank indicated their discomfort with the strong currency would keep away. Yet, short CAD (long USDCAD) looks very attractive on fundamental basis. USD/CAD held key support at 1.3385 on the bearish shift for oil and break above 1.3570 would suggest further bullish momentum.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.