USD/CAD Forecast: Is The Worst Over For Oil And The Loonie?

• The Canadian Dollar fell to the lower ground with oil but stabilized.
• A double-feature Friday brings the focus back to Canadian data.
• The technical picture is slightly bullish for the pair.

This was the week: Crashing oil, and international trouble

Oil prices suffered a massive plunge on Tuesday, extending previous losses with WTI Crude Oil falling below $55, the lowest since November 2017. The trigger came from a tweet by US President Donald Trump that called on OPEC not to intervene. The cartel considered cutting production by 500,000 barrels per day. 

The Canadian Dollar reacted and was pressured to the downside with USD/CAD hitting a high of 1.3263. 

After the crash, reports came out that OPEC and other countries were considering a cut of 1.4 million barrels per day, and the news allowed petrol prices to recover. The loonie followed.

US Retail Sales rose by only 0.3 percent on both the headline and the core figure, slightly below expectations. Inflation also slightly missed by decelerating to 2.1 percent on Core CPI. Nevertheless, the Fed remains on course to raise rates in December. Fed Chair Jerome Powell acknowledged some headwinds but conveyed a confident message about the economy. 

Brexit grabbed the headlines. The European Union and the UK reached a draft withdrawal agreement. The news helped risks assets, the Canadian Dollar among them. However, concerns about the political situation resulted in a fall of the pound and some pressure on risk assets.

Canadian events: Inflation and retail sales Friday, oil remains important

The Bank of Canada publishes its Financial System Review report on Thursday. Apart from the state of the banks, the publication may also shed light on the economic situation and the Bank's policy.

Top-tier releases are due on Friday. Monthly inflation data for September was weak: with headline CPI falling by 0.4 percent and core CPI by 0.1 percent. Nevertheless, yearly figures have been stable with 2.2 percent on the headline and 1.5 percent on the core. The data for October may show similar statistics. An acceleration in inflation could push the loonie higher.

Retail sales are released with a delay but undoubtedly matter due to the Canadian consumer's contribution to the economy. Back in August, the volume of sales slipped by 0.1 percent while core sales fell by 0.1 percent. A bounce could be seen in the figures for September. 

As in recent weeks, oil prices will continue having an outsized effect on the C$. Headlines coming from Saudi Arabia and Russia regarding oil cutting oil output are likely to swing the loonie.

Here is the Canadian calendar for this week

US events: Durables, housing data, and Thanksgiving 

Contrary to the Canadian economic calendar, the American one is lighter, partly due to Thanksgiving on Thursday. Lighter trading volume is also expected on Friday. 

Building Permits and Housing Starts kick off the week on Tuesday. The numbers tend to offfest each other. More significant events are scheduled for Wednesday. Durable good orders for October provide a look into Q4 investment data. The Federal Reserve recently noted that investment has "moderated.". Core figures have a greater impact than the volatile headline figures. 

Existing Home Sales are also of importance amid the ongoing slowdown. Sales of homes badly disappointed in September, but this may be attributed to Hurricane Florence. 

Trade talks between China and the US are also of importance ahead of the meeting between Presidents Trump and Xi in Buenos Aires at the of the month. Progress in talks could indirectly support the loonie while a clash could weigh on the C$ due to concerns about global trade.

Here are the critical American events from the forex calendar: 

USD/CAD Technical Analysis

The USD/CAD is battling the uptrend support line that accompanies it since early October. Momentum remains positive but has eased. The pair continues trading above the 50-day and 200-day Simple Moving Averages. All in all, the technical picture is mostly bullish, but not as strong as it used to be.

Looking up, 1.3225 capped the pair in early September and remains relevant. The recent peak of 1.3260 is the next line to watch. Higher, 1.3295 capped USD/CAD in July. 1.3350 and 1.3380 held the pair down in July. 

1.3150 was a low point in mid-November. 1.3050 was a swing low early in the month. Below 1.3000, 1.2970 was a swing low in mid-October and also provided support in August. 1.2920 was a low point in mid-October.