The Canadian currency remains under certain pressure, like many commodity currencies. Oil traders' hopes for a jump in oil prices did not happen, and the price of Brent is slowly sliding down. Also, the "dovish" position of the head of the Bank of Canada, which recently announced that the aggressive pace of tightening monetary policy should not be expected, has a negative impact on the USDCAD pair.
But still, the "main" factor for the Canadian currency is the oil market. The reaction of traders to Stephen Poloz's statement was very short-term, because the head of the regulator did not rule out further rate hikes - everything will depend on the dynamics of key macroeconomic indicators. In turn, the oil market plays a strategic (budgeting) role for the Canadian economy. Therefore, in the medium and long term, oil will have a key impact on the Canadian currency.
For several weeks, the oil market was in an unstable condition. First, oil traders feel pressure of an increase in oil production by OPEC countries. In September, the increase in this indicator was 50,000 barrels per day. In addition, a serious concern is the discipline of implementing the agreement on the limitation of production. Such large oil-producing countries, as the United Arab Emirates or Iraq, fulfill this agreement only by 30-35%. In general, the level of compliance was down last month to 86%, maintaining a negative trend.
Secondly, against the background of a general increase in production and the "lack of discipline" of the agreement's participants, the production of oil shale in the United States is growing. After a temporary lull, the production activity of Americans in this direction again began to manifest itself. Yesterday it was known that the number of drilling rigs for the week increased again, with the number reaching 750 (for comparison - exactly, one year ago, there were 425 of them).
In addition, the US industrial giant ExxonMobil this year acquired several sites in the shale oil fields - in the Midlands and Delaware basins. The total size of these sites is almost 9,000 hectares, but the potential amount of resources is 6 billion barrels of oil equivalent. This adds to the fact that at the beginning of this year, Exxon Mobil acquired plots of about 100,000 hectares in the Delaware Basin, and in the Midland Basin the company already has blocks of more than 60,000 hectares. All this indicates that the development of new oil shale deposits will only increase, putting pressure on oil quotes. The experts interviewed by Reuters are almost unanimous that this factor will serve as an "anchor" for oil, and prices are unlikely to exceed the autumn peak.
Also, the price momentum of September was connected with the political factor, which, apparently, also does not justify the expectations of oil traders. It is a question of the Kurdish referendum that took place on September 25. Turkey reacted extremely negatively to this event, threatening to block the channel for the export of Kurdish oil. But at the moment only Iraq has introduced sanction restrictions that have little effect on the process of trading in oil. According to the local press, the Kurdistan government continues to export about half a million barrels of oil a day through the Turkish port of Ceyhan.
Thus, at the moment, oil traders' hopes for a "shortage" of 500,000 barrels per day have not been realized. This fact has stalled the growth of the cost of a barrel of Brent oil in the area of $55. The general fundamental background has not yet contributed to the further rise in price of commodities. The Canadian currency also has no support for its recovery - neither from internal factors, nor from outside.
From the technical point of view, the pair has the potential for growth. Consider the graph of USDCAD on the D1 timeframe. First, the price is located between the middle and top lines of the Bollinger Bands indicator. Secondly, the indicator Ichimoku Kinko Hyo formed a bullish signal "Golden Cross", while the pair itself is above the lines of Tenkan-sen and Kijun-sen. In addition, the MACD oscillator is in the selling area, which also speaks of the priority of the northern movement.
Given the situation, at this point in the pair we can consider long positions to the nearest resistance level 1.2585 (this is the lower boundary of the Kumo cloud on D1). If the price overcomes this level, then the pair will open the way to the mark of 1.2885 (the top line of the cloud on the same timeframe) - but this is a long-term issue with the condition of further decline of the oil market. Support level is the middle line of the indicator Bollinger Bands, which corresponds to 1.2295.