The Canadian Dollar has been in demand lately due to the OPEC agreement to cut oil production. As we mentioned in our November monthly review, it´s very rare that OPEC countries hold on to their promises. Besides that, the oil production quotas that are now free for all other members to share among after the boot that Indonesia got from OPEC, makes up for 50% of the agreed amount to be cut.

Still, oil prices have rallied during the second part of last week, taking WTI price (West Texas Intermediate) higher to $52.50/barrel and Brent Crude close to $55.50/barrel.  Given the enormous oil reserves in Canada, the Canadian Dollar has benefited from the improved sentiment in the oil market and USD/CAD has slipped from around 1.36 to below 1.33.

But, the BOC (Bank of Canada) will be holding their meeting in about an hour, which might upset the CAD buyers and throw the recent trend off course. I don´t expect a surprise interest rate cut from the BOC this meeting regarding the interest rates, but the statement might offer some action. 

The move down seems exhausted

The 20 and 200 SMAs on the H4 forex chart (respectively in grey and pink) are keeping the retrace in check so they are the first level of resistance and they stand just below 1.33, which in itself is a strong resistance level. 1.3350 is another strong resistance level and we can find the 50 and 100 SMAs a dozen of pips above there, which will slip down to 1.350 by the time the price gets there in case the BOC goes all bearish on the rate statement.

Despite the OPEC oil deal and considering all the possible caveats in the implementation process which will follow, the decline in USD/CAD has been sort of muted. So, this leads me to think that the USD/CAD sellers are not that confident and will fold their cards once the oil prices reverse and situation changes. Therefore, the risk is on the upside.