USD/CAD Loonie Higher After Oil Price Boost Ahead of Trade Balance

Canadian dollar higher after oil surge following supply concerns

The loonie got a boost from energy prices today as it started the trading session losing ground versus the USD and headed north of 1.3160. Oil prices surged after supply concerns from Libya and Brazil boosting energy markets worldwide and the USD/CAD is trading at 1.3065.

According to analysis by BofA’s Kamal Sharma Canada is facing the fastest one year outflow out of the top ten developed economies. Demand for Canadian assets and the loonie has been lower after the decline of energy prices. The Canadian economy was too heavily dependant on crude prices, and with the collapse driven by record supply levels out of sync with lower demand there is no other sector that can offset the loss. Manufacturing has not managed to bounce back from the pain inflicted by a strong loonie in the credit crisis aftermath.

Bank of Australia holds Rates at 2.0 Percent

The RBA held rates at 2.00 percent despite some pressure to cut. Governor Glenn Stevens is optimistic about the Australian economy and that appreciated the AUD to above 0.72. The currency pair has given some of the gains but is now rising again to the 0.72 price level.

Canadian and American Trade Balance Releases

The fate of the Canadian dollar heading into the first week of November will depend on Canadian and U.S. economic indicators that will be released at the same time. On Wednesday, November 4 both Trade balances will be published. Last month the Canadian trade data showed a bigger than anticipated deficit. Exports dropped 3.6 percent to a three year low resulting in a $2.53 billion deficit. While service PMIs show steady growth, it is not enough to offset the losses in manufacturing and the energy sectors. The forecast for this month’s Canadian trade data is a deficit of $2 billion as there has been little changed to the makeup of the Canadian economy.

The U.S. trade balance also recorded a larger than expected deficit last month at $48.3 billion. Exports have fallen and imports continue to grow as the USD strength is becoming a drag in the recovery of the U.S. economy. Federal Reserve members will be watching the final trade balance to measure the impact it could have on the gross domestic product. U.S. growth is facing significant headwinds that could delay the much-awaited interest rate hike indefinitely.

Canadian and American Jobs Reports to Close Trading Week

The highlight of the week will be the U.S. non farm payroll (NFP) report that will be published on Friday, November 6. At the same time the Canadian jobs report will be released. The trend for both reports has been diverging with the U.S. data losing traction, while Canadian jobs continue to beat expectations. The size of the economy and the significance of the NFP will give the American data bigger significance. That being said the fact the there is Canadian data to compare will give the loonie some arguments and not be at the total mercy of the U.S. data.

CAD events to watch this week:

Wednesday, November 4
8:30am CAD Trade Balance
Thursday, November 5
10:00am CAD Ivey PMI
Friday, November 6
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am CAD Building Permits m/m

*All times EST
For a complete list of scheduled events in the forex market visit the [MarketPulse Economic Calendar](

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza