CAD Rallies Ahead Of Oil Inventories

The USD/CAD has pulled back from Monday’s highs and has entered a consolidation phase near the 1.3300 handle. However, today’s quiet is soon to change. With the weekly crude oil inventory cycle and Wednesday’s BoC Interest Rate Decision rapidly approaching, the Loonie has a great chance of posting a directional move in the next 24 hours.

Oil Inventories, BoC On Deck

Ahead of Wednesday’s close, we will see a collection of primary market drivers facing the USD/CAD hit the newswires. Here is a quick look at the key events:

Event                                                                     U.S. Schedule

API Crude Oil Stocks                                           Tuesday, Late Session

BoC Interest Rate Decision                                Wednesday, Pre-Market

U.S. ISM Non-Manufacturing PMI(Nov.)           Wednesday

BoC Press Conference                                         Wednesday

On the oil front, this week’s inventories are expected to pullback from pre-holiday levels. The increased demand stemming from the Thanksgiving weekend has analysts projecting a -1.798M decrease in the EIA stocks report. If proven true, be on the lookout for WTI to hold the line above $56.00.

Bank of Canada (BoC) On Deck For The USD/CAD

The largest USD/CAD market driver for Wednesday will be BoC Interest Rate Decision. Rates are expected to be held static at 1.75%; should there be a surprise cut, the USD/CAD is very likely to take out October’s Highs.

Here are the levels to watch ahead of the BoC:

• Resistance(1): October High, 1.3347
• Support(1): 78% Retracement, 1.3280
• Support(2): Daily SMA, 1.3276

Overview: No doubt about it, the USD/CAD is going to be extremely active during Wednesday’s forex session. Subsequently, either a bullish or bearish directional move is probable. As long as rates remain above 1.3280, a buy-side bias is warranted. Should we see a dovish BoC and a boost to oil inventories, a breakout north of 1.3350 will become a foregone conclusion.