- Weekly EIA data shows a large buildup in crude oil inventories in the U.S.
- US Dollar Index clings to gains above 95.
- Canadian data shows a decline in manufacturing sales in August.
Yet another sharp drop witnessed in crude oil prices forced the commodity-sensitive loonie to weaken against its peers in the early NA session, and the USD/CAD pair advanced to a fresh daily high at 1.3005 before retreating slightly. As of writing, the pair was trading at 1.2990, adding 0.42% on a daily basis.
After the weekly report released by the EIA revealed that crude oil stocks in the U.S. increased by 6.5 million barrels in the week ending October 12, the barrel of West Texas Intermediate slipped below $70 for the first time in nearly a month. Further details of the report showed that both gasoline production and distillate fuel production increased in the same period. At the moment, the barrel of WTI is trading at $70.05, losing more than $2, or nearly 3%, on the day.
On the other hand, Statistics Canada reported that manufacturing sales declined by 0.4% in August following July’s 1.2% increase to put some extra weight on loonie’s shoulders.
In addition to the CAD weakness, a stronger greenback on Wednesday provides an additional boost to the pair. Although today’s housing market data fell short of market expectations, the US Dollar Index stays in the positive territory as European currencies stay under pressure on disappointing inflation figures. Before the FOMC releases the minutes of its September meeting at 18:00 GMT, the US Dollar Index is up 0.25 on the day at 95.35.
“Recent FOMC meeting minutes have been more interesting than expected, highlighting longer-term topics such as alternate monetary policy frameworks and the balance sheet. We expect the minutes for the September meeting to emphasize the Committee’s expectation of another rate hike in December, the fourth of 2018,” Nomura analysts wrote in a recently published report.
Technical levels to consider
With a daily close above 1.3000 (psychological level/daily high/50-DMA), the pair could target 1.3060 (100-DMA) and 1.3100 (Aug. 23 high). On the downside, supports are located at 1.2970 (200-DMA), 1.2915 (Oct. 16 low) and 1.2880 (Sep. 20 low).
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