Canadian Dollar Falls As Oil Prices Weaken

The Canadian dollar declined against its key counterparts in the European session on Friday, as oil prices dropped after the International Energy Agency warned that the steep oil output growth in the U.S. could offset a plunge in Venezuela's production. 

Crude for March delivery fell $0.32 to $63.57 per barrel. In its monthly report, the IEA said that explosive growth in the U.S. and substantial gains in Canada and Brazil could far outweigh potentially steep declines in Venezuela and Mexico. 

The output from non-OPEC countries could rise by 1.7 million barrels of oil per day this year, an increase of 0.1 mb/d estimated in last month's report, it said. The IEA said it expects US crude production to rise to 10 mb/d in 2018, overtaking Saudi Arabia and rivalling Russia. In the U.S., the House of Representatives passed a stop-gap funding measure late Thursday to avert a government shutdown. 

But prospects appear gloomy in the Senate, where Democrats say they have the vote to block the spending bill in a bid to negotiate on budget and immigration deals. The currency has been trading in a negative territory in the Asian session. Reversing from an early high of 89.55 against the yen, the loonie weakened and was trading at 89.07. 

The next possible support for the loonie-yen pair is seen around the 88.5 area. The loonie dropped to 1.5259 against the euro early in the session and held steady since then. The pair closed Thursday's trading at 1.5194. Data from the European Central Bank showed that the euro area current account surplus increased in November after falling for two straight months. 

The current account surplus rose to EUR 32.5 billion from EUR 30.3 billion in October. Pulling away from an early high of 0.9923 against the aussie, the loonie edged down to 0.9972. The loonie is seen finding support around the 1.01 level. The loonie fell back to 1.2429 against the greenback, off its early 2-day high of 1.2400. 

Continuation of the loonie's downtrend may see it challenging support around the 1.25 area. Looking ahead, Canada manufacturing sales for November and University of Michigan's preliminary consumer sentiment index for January are set for release in the New York session.

Read more: https://www.instaforex.com/forex-news/2110221?x=MKPD

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