USD/CAD Making A Bullish Reversal As EIA Oil Inventories Fall Less Than Expected

Skerdian Meta•Wednesday, November 16, 2022•2 min read

EIA crude Oil inventories showed a 3.5M barrel build

USD/CAD was very bullish until early this year as it was trading close to 1.39, with the USD being really bullish as the FED kept raising rates at a very fast pace. But, with the slowdown in inflation (at least on economic reports) the FED is giving signs that they will slow down as well, which has hurt the USD and has improved risk sentiment in financial markets.

This has turned USD/CAD bearish and this pair fell to 1.3230s earlier, where it seems to have formed a support area. Today we saw a doji candlestick at that support zone and this pair bounced above 1.33, pushing above the 20 SMA 9gray) as well on the H4 chart. The positive US retail sales for October gave this pair a push, but the softer-than-expected EIA inventories are also playing a part.

USD/CAD H4 Chart – Buyers Pushing Above the 20 SMA

Closing a bullish candlestick after the small doji at the bottom

EIA Weekly US Oil Inventories

US oil inventories -440K vs -5400K expected
Prior was +3925K
Gasoline +2207K vs +310K expected
Distillates +1120K vs +513K expected
Refinery utilization +0.8% vs +0.5% expected
Implied demand at 21.087 mbpd vs 20.267 mbpd prior
Gasoline demand -269K vs +351K bpd prior

The headline of the report looks slightly bullish at first glance, the buildup in inventories is much smaller than expectations, while the details are much softer. Besides that, today’s EIA report is a bit of a disapointment after yesterday’s private API figures, which showed a 5.835 million barrel inventory buildup. Oil found a bit of a footing after the numbers but remains down $1.66 on the day.

Canadian October 2022 Consumer Price Index Report

October CPI YoY 6.9% vs 6.9% expected
September CPI YoY was 6.9%
CPI MoM +0.7% vs +0.7% expected
Prior CPI MoM reading was +0.1%
Gasoline prices YoY +17.8% vs +13.2% in prior
Gasoline prices MoM+9.2% vs -7.4% prior
Food prices MoM +10.3% vs +10.8% prior
Full report

Core measures:

BOC core CPI YoY 5.8% vs 6.0% prior
BOC core CPI MoM +0.4% vs +0.4% prior
Median CPI 4.8% vs 4.7% prior
Trimmed mean CPI 5.3% vs 5.2% prior
Common CPI 6.2% vs 6.0% expected (6.0% prior)

This is a mixed bag but the core numbers are mostly higher and that’s the inflation signal for the Bank of Canada. For now, the BOC will be patient in letting some of the hikes pass through but the market is still pricing in a 34% chance of 50 bps rather than 25 on December 7.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.