The USDAD currency pair was trading up 12.1 pips for the day after giving up much of its earlier gains during the North American session. The weaker Canadian dollar drove the currency pair’s move higher due to the falling crude oil prices, but the pair is still on a downtrend that started in early November.
USDCAD Prices Edged Higher on Weak Canadian Dollar. What Next?
The Canadian Dollar (CAD) has faced headwinds due to a decline in crude oil prices, contributing to this upward pressure on the pair. Western Texas Intermediate (WTI) crude oil prices have been on a downward trajectory since Wednesday and are currently trading at approximately $75.00 per barrel.
Crude oil prices have fallen since late September when the WTI hit a US$95 per barrel high. However, the USDCAD currency pair has not fallen as heavily as the oil prices, mainly due to the robust labour market reports witnessed in the country that have seen the loonie strengthen against the US dollar.
The decline in crude oil prices can be attributed to investors’ anticipation of an agreement on supply cuts into 2024 at the upcoming meeting of the Organization of the Petroleum Exporting Countries and their allies (OPEC+).
Initially scheduled for November 30, the meeting has raised concerns and uncertainty in the oil markets, leading to the recent drop in crude oil prices.
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On the contrary, the Canadian Dollar (CAD) traded positively in Friday’s trading session. This was primarily driven by an encouraging Retail Sales report from Canada and a broader recovery in market sentiment.
Canada’s Retail Sales for September exceeded expectations, posting a 0.6% increase compared to the market’s forecast of no growth (0.0%) and a previous reading that showed a 0.1% decline. Retail Sales, excluding auto sales, remained steady with a 0.2% increase, contrasting with the prior month’s 0.2% contraction.
In contrast to the Canadian Dollar’s strength, the US Dollar Index (DXY) has been struggling to reverse its losses. Even though US Treasury yields have improved, with the US 10-year and 2-year bond yields currently at 4.50% and 4.97%, respectively, as of the latest data, the US Dollar has not seen a significant rebound.
