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Dragged lower by oil prices! Will the Loonie get a reprieve this week?

Canada won’t be printing top-tier economic reports this week, so it’s likely that Loonie traders will once again take cues from oil prices and overall risk sentiment.

Over the weekend Saudi Arabia announced that it would cut its supply by 500,000 barrels per day in December.

Oil prices naturally rallied at the news, but now market geeks are speculating on how long market bulls will celebrate the temporary measure. After all, concerns over slower global demand are still in play especially now that China is printing weaker economic data after another.

Overall risk sentiment can also affect the Loonie’s prices. Headlines related to the U.S.-China trade war, Italian government budget, and Brexit, for example, could set the tone for high-yielding currencies like the Loonie.

Oh, and don’t forget to watch the Greenback’s price action! Remember that Uncle Sam is set to print inflation and retail sales numbers this week. Downside surprises can knock some traders out of pricing in an uber hawkish Fed next year, so y’all might want to stick around during the report releases.

Last Week’s Price Review

The Loonie got whupped hard and is currently the biggest loser of the week (as of 6:00 pm GMT).

Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart
Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart

And this week, the Loonie appears to have taken directional cues from oil prices again.

Unfortunately for the Loonie, oil prices slumped yet again this week due to global growth concerns, higher U.S. oil inventories, higher OPEC oil production, and supply concerns because of the waivers granted to some oil importers, which weakens the effects of U.S.sanctions against Iran, market analysts say.

Aside from sliding oil prices, some market analysts also blamed the Loonie’s slide on Tuesday to political uncertainty ahead of the U.S. midterm elections, which makes sense since the U.S. is Canada’s main export market and if the Democrats try to hinder Trump’s fiscal plans, then that would likely lead to weaker U.S. economic growth and, by extension, weaker Canadian economic growth.

In any case, the Loonie’s price action did become a bit more mixed on Wednesday and Thursday, which implies that the Loonie became more vulnerable to opposing currency price action.

However, the damage was already done since most CAD pairs were already below last week’s closing prices (dashed, horizontal line) by Wednesday.

Oddly enough, most CAD pairs began tracking oil prices lower again after the FOMC statement.

And as a side note, there was a rumor that the U.S. and Canada were bickering because the U.S. allegedly introduced unwanted changes to the USMCA deal, but that didn’t seem to have any noticeable effect on the Loonie’s price action.

The Loonie also appears to have been hit by selling pressure when a U.S. federal judge decided to block the Keystone XL oil pipeline.

That decision then appears to have weighed down on the Loonie since oil briefly recovered on Friday, but the Loonie just kept on steadily sliding lower.