USD/CAD is declining on Friday, touching the lowest level since October 29. The pair is following the bearish channel that started this month in an exemplary manner. On Christmas Day, the price tried to break above the channel’s resistance at 1.1368 but failed to do so.
Currently, one US dollar buys 1.3079 Canadian dollars, down 0.32% as of 3:40 PM UTC. Yesterday, the price closed 0.40% lower.
The main driver behind the Loonie’s rally is increasing oil prices.
Earlier today, the Energy Information Administration (EIA) said that US crude inventories declined by almost 5.5 million barrels last week ended December 20, while analysts expected a drop of only 1.7 million barrels. The report, which is usually published on Wednesday, was delayed until Friday due to the Christmas holiday.
The EIA report also stated that gasoline inventories increased by 1.96 million barrels, slightly more than the expected rise of 1.66 million barrels. Distillate inventories declined 152,000 barrels, against analysts’ forecasts of an increase by 800,000 barrels.
Given the declining supply, oil price bounced back after an intra-day drop. Both Brent and WTI brands are trading close to 3-month highs again. Oil prices are only a stone’s throw away from updating the highest level in eight months.
As a rule, surging crude boosts the Loonie since Canada is an oil-dependent economy.
Yesterday, Russian Energy Ministry said that a decline in oil supply would push prices up after the New Year. The ministry’s findings were published in a draft energy strategy document cited by Russian media. The report reads:
“Accelerated development of the most effective reserves and decreasing investment into geological exploration and into oil and gas projects in different regions will create prerequisites for the decreasing supply of oil after 2020, which will require intensive investment into shale and other costly projects and may lead to the start of the new phase of price growth.”
However, the document says that the price might eventually reduce on weakening oil demand.
Besides a stronger Canadian dollar, the USD is itself losing ground against majors, as year-end flows put pressure on the American currency.