The Loonie Dives on Oil Inventories Built-Up
Skerdian Meta • 2 min read
At the bottom left corner of my forex platform, I usually keep a EUR/CHF chart open so I can see the risk sentiment in the forex market and sometimes place trades as well on this forex pair. If this pair dives, then one thing is for sure: the risk aversion is strong because, although the Euro has recently turned into a safe haven currency somehow, the Swiss Franc is the ultimate safe haven, the coffers in the safe haven fortress.
So, I was looking at the top bottom of my trading platform and saw an 80 pips jump. I instinctually thought that maybe the risk aversion of the last two days is over now that the Swissy is giving up. But no, it was the USD/CAD chart that had eclipsed the USD/CHF chart.
USD/CAD is extremely sensitive to oil prices.
It totally slipped out of my mind that the US crude oil inventories were to be published today. I quickly checked it up and saw that the inventories had increased massively last week. In the previous week, the inventories fell by 0.6 million barrels and this time they were supposed to grow by 1.4 million. Instead, the built up in oil inventories was massive, 14.4 million barrels to be precise.
That´s quite a lot and it surely won´t help oil prices, which have been declining about 7 cents in the last two weeks. Oil dropped another 1.5 cents top to bottom after the data was released and the Canadian Dollar followed suit. USD/CAD jumped about 80 pips higher after the release, but it is sliding down as I type likely due to the negative market sentiment towards the Buck. The USD just can´t get a break.
However, this is not good news for the Loonie (USD/CAD). Now the market sentiment is terribly bearish towards the USD but when all this ends, which will happen in less than a week unless Trump wins the US elections, then the CAD will be in trouble and this forex pair will likely reach 1.40 in no time.