West Texas Intermediate has fallen $2.89 USD a barrel, Russia has indicated that the recent self-imposed supply cuts have now caused the world’s excess inventory to deplete. Russia and its oil allies are now contemplating at bringing oil production back to previous levels. The Canadian dollar has reacted accordingly and there are expectations that it could move to 1.3050.
USDCAD 1.2955, 1.2905, 1.2898 1.2980, 1.3000, 1.3020
USD-CAD has been underpinned by a broadly firmer U.S. dollar and by a relatively sharp retreat in oil prices, which are down by nearly 3.5% in the WTI benchmark market from the major-trend peak that was seen on Tuesday. Russia energy minister Novak earlier said that the OPEC-led supply restriction initiate could be “softly” eased on the view that global inventories are stabilized. The Canadian dollar has a correlative link to crude prices as it is key export of the Canada. USD-CAD posted a 10-day high at 1.2921 yesterday and has since remained buoyant. Technical analysts will be looking for a break and daily close above of the recent range high at 1.2924 to indicate scope for a sustained upside vault.
EUR-USD has been re-established back above 1.1700 after earlier dipping to a 1.1684 low. An above-forecast German Ifo sentiment survey for May provided some added buoyancy to the euro, although EUR-USD had already been lifting ahead of the data release. The dollar, although firming earlier, and although remaining near trend highs, has lost traction, concomitantly with a softening in Fed tightening expectations. Implied rates of Fed funds futures are still fully discounting in a 25 bp June tightening, and another in September, but the chances of a December move, which would be the fourth this year, have eroded to about 30% now. Also in the mix, and liable to keep EUR-USD’s upside in check, is the unfolding policy formation of the new Italian government, which has been formed by an unlikely alliance of Eurosceptic right-wing and left wing populist parties. Overall, we remain bearish of EUR-USD in the big picture. Trend resistance comes in at 1.1734-35.