OPEC holds its ground, but can WTI and the Canadian Dollar do the same?

The outcome of the OPEC+ meeting was a bit of a surprise!

Energy 4

The outcome of the OPEC+ meeting was a bit of a surprise!  Given the rise in oil prices, particularly since February 1st, WTI prices have risen over 20%!  Many analysts had forecasted that the rise in crude prices, combined with the decreased supply and the increase in expected demand, would be enough for members to raise output anywhere from 1.2 million barrels per day to 1.5 million barrels per day.  Anything less, and the markets would be disappointed.  However, at the conclusion of today’s OPEC+ meeting, ministers decided that it would be best to leave current output UNCHANGED!  As a result, WTI crude prices rose 6% at one point today to its highest levels January 9th, 2020, near 64.785 (and completed its flag pattern target!).   The January 9th, 2020 highs acts as first resistance at 65.66.

Source: Tradingview, FOREX.com

Don’t miss Matt Weller’s special webinar reviewing the OPEC meeting and outlining the key factors for oil traders to watch over the rest of 2021 – register for FREE here!

EUR/CAD has been highly negatively correlated to the price of WTI oil since the beginning of the year. (With Fed Chairman Powell’s comments regarding monetary policy today, it’s best not to use USD/CAD for Canadian Dollar analysis, due to today’s volatility in the US Dollar).  Notice that the correlation coefficient between EUR/CAD and WTI flipped from positive to negative on January 8th. Although the negative correlation has weakened a bit since February (-0.86 lows), it is currently strengthening again, currently at -0.62.  EUR/CAD has been in a downward sloping channel since late July 2020.  With the move higher today in Crude prices, EUR/CAD moved aggressively lower.  The pair is currently testing the bottom, downward sloping trendline of the channel near 1.5150.  Horizontal support from May 2020 below the channel crosses at 1.5050. 

Source: Tradingview, FOREX.com

On a 240- minute timeframe, EUR/CAD has formed a shorter-term downward channel of its own, briefly breaking below in mid-January.  The pair is currently testing the bottom of this channel as well.  Notice that the RSI is diverging with price, indicating that the pair maybe ready to bounce (and that the bottom trendline may hold).  Horizontal resistance is above near 1.5200 and 1.5230.  Watch for bears to add to short position near these levels, in hopes of taking out weak longs below today’s lows.

Source: Tradingview, FOREX.com

Click here to learn everything you need to know to trade the oil markets

The result of no change in supply from OPEC will result in markets focusing on the demand side of the equation for the next month.  If the vaccine rollout continues to be strong, expected demand will pick up and prices should continue higher.

OPEC+ will meet again in April to discuss output.

Learn more about oil trading opportunities.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.