As was widely expected, Bank of Canada maintained the current interest rates unchanged at +1.75% and the Loonie weakened. In its accompanying statement the bank stated that it will remain data dependent and that overall growth and business investment strengthened. Of particular interest was the comment that the oil sector is beginning to recover and that the escalating trade conflict casts doubts on global outlook. It should be noted that the Loonie weakened upon the release as CAD bears were encouraged by the preservation of the banks accommodative policy, which according to the bank is still warranted. Never the less analysts noted that the statement seems to have more of an optimistic tone, surprised by the market’s reaction. We see the case for the Loonie to correct somewhat and regain at least partially some of the losses in the near term. Some possible bullish tendencies of the oil market could also support such a scenario. USD/CAD rose yesterday, breaking the 1.3510 (S1) resistance line, now turned to support, and continued to hover slightly above it during today’s Asian session. We would not be surprised to see some bearish tendencies today, especially should oil prices rise somewhat. Should the pair come under the selling interest of the market, we could see it breaking the 1.3510 (S1) support line and aim for the 1.3425 (S2) support level. Should the pair’s long positions be favored by the market, we could see the pair rising even further and aim for the 1.3590 (R1) resistance line.
Oil prices rise, supported by API drawdown
Oil prices climbed higher yesterday, supported by output cuts by OPEC an also dropping supplies from Iran. Data showed that Iranian May crude exports fell to less than half of April levels, after the US tightened sanctions on Persia. Also many analysts tend to expect OPEC+ to extend its supply cuts in its meeting, end of next month. Oil prices were also supported by a surprise drawdown of -5.3 million barrels of US inventories as shown by API, implying a tight US oil market. On the other hand it should be noted that worries continue to exist about a possible global economic slowdown having a detrimental effect on oil prices. Analysts also pointed out that should also the EIA report later today show a decent drawdown as well, we could see oil prices rising even further. WTI prices rose yesterday, breaking the 59.10 (S1) resistance line, (now turned to support). Should there be news, showing a tightening oil market we could see oil prices rising even further. Should the bulls continue to direct the commodity’s direction we could see it aiming if not breaking the 60.50 (R1) resistance line. On the flip side if the bears take over, we could see oil prices breaking the 59.10 (S1) support line and aim for the 57.75 (S2) support barrier.
Other economic highlights, today and early tomorrow
Today during the American session, we get from the US the 2nd estimate of the GDP growth rate for Q1. Also from the US we get the goods trade balance for April, the pending home sales also for April and the EIA crude oil inventories figure. In tomorrow’s Asian session, we get a number of releases from Japan, yet we tend to highlight Tokyo’s inflation rates for May, the unemployment rate for April and the preliminary industrial output growth rate for April. Also during the Asian session we get China’s NBS manufacturing PMI for May. As for speakers please note that BoE’s Ramsden, Fed’s Clarida and BoC’s Wilkins are scheduled to speak.
USD/CAD H4
Support: 1.3510 (S1), 1.3425 (S2), 1.3360 (S3)
Resistance: 1.3590 (R1), 1.3660 (R2), 1.3720 (R3)
WTI H4
Support: 59.10 (S1), 57.75 (S2), 56.00 (S3)
Resistance: 60.50 (R1), 62.00 (R2), 63.70 (R3)
