USD/CAD ripe for a bearish breakout as OPEC+ conflict drags on
- The USD/CAD price is close to a bearish breakout as OPEC+ leaders disagree on supply cuts.
- While most OPEC members want to extend cuts, a group led by the UAE has opposed the measures.
- The pair is also reacting to the record bounce of Canada's GDP.
The USD/CAD price is wavering as forex investors focus on the ongoing conflict among the OPEC+ coalition and the strong Canadian GDP numbers. The pair is trading at 1.2940, which is the lowest it has been since November 1.
OPEC+ coalition eyed
Canada is the fifth leading crude oil producer in the world, exporting more than 3.8 million barrels per day. This makes the Canadian dollar highly sensitive to the happenings in the energy sector. Indeed, in recent months, the loonie has gained more than 11% against the dollar as the price of oil has risen by more than 300%.
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This week, the Canadian dollar is wavering as traders focus on key differences among the OPEC+ cartel. On Monday, a meeting called to deliberate on extending supply cuts failed as some countries opposed the idea.
While Saudi Arabia and Russia prefer extending cuts, other countries like the United Arab Emirates (UAE) and Nigeria have opposed the measures.
As a result, the price of crude oil has been wavering. Brent is trading at $47.0, down from last week’s high of $49 while the West Texas Intermediate (WTI) is trading at $44.10.
Canada GDP bounces back
The USD/CAD is also reacting to the relatively strong GDP data from Canada. In a report released yesterday, the country’s statistics office said that the economy bounced back by 40.5% in the third quarter. That was the best quarterly performance since the office started collecting the data.
The strong performance, which missed expectations, came after a 38.1% slump in the third quarter. Also, the economy is still smaller than where it was before the virus.
This growth happened as private consumption, exports, and government spending increased. As we have seen in other countries, fixed asset investments were relatively softer as companies refocused on cash preservation.
Still, analysts believe that the economy will slow down in the final quarter as the country deals with the new wave of the virus. Just yesterday, the country confirmed a record 7,860 new infections, pushing the total to more than 383k.
Meanwhile, on Monday, Justin Trudeau’s government unveiled a c$381 billion budget deficit, the highest on record. He also pledged an additional c$100 billion to jumpstart the economy.
USD/CAD technical outlook
On the daily chart, we see that the USD/CAD has double-bottomed at the 1.2940 level. Also, the pair has been in a strong downward trend that is also supported by the descending black trendline. It is also slightly below the 25-day exponential moving average. Therefore, it seems like bears are close to prevailing, which means that the pair will possibly continue falling. If it breaks out below the current level, the next level to watch will be 1.2900.