FX Action: USD-CAD has remained heavy

FX Action: USD-CAD has remained heavy, in a consolidation phase near the 16-day low that was seen yesterday at 1.2984. Oil prices have today seen modest declines after recent gains, which culminated in a nine-month high yesterday. The oil market will remain the dominant driver of USD-CAD. Analysts remain bullish on the Canadian dollar. The OPEC+ group will decide on extending prevailing quota restrictions next Tuesday (December 1). A three month extension from January has been priced in, while the group is also considering a six-month extension, which by its own analysis would likely swing the oil market back into supply deficit. While global stockpiles are high, demand for oil is set to be well below normal through the northern hemisphere winter due to Covid countermeasures, which are already tight in Europe and becoming more restrictive across North America and in the more northerly Asian countries. There is also a view that after the Covid pandemic has gone, oil will have a more elastic characteristic, with many developed nations likely to see a higher prevalence of working from home than before, reducing demand for fuel and enabling consumers of gasoline to reduce commuting days during times of oil high prices. These are motivating reasons for oil producing nations to keep supply restrained. Assuming quota discipline is maintained, the outlook is bullish for oil on the back of the increased optimism for a vaccine-assisted route out of the prevailing Covid situation. USD-CAD has been trending lower since March, and analysts anticipate there is more to come. The current trend low is at 1.2928, which was seen earlier in November, and which was the lowest level the pair has seen since October 2018.