USD/CAD - Canadian dollar has low oil price blues

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· WTI oil prices extend slide ahead of Opec meeting

· Fed Chair Powell reiterates hawkish comments

· First case of US Omicron variant saps risk sentiment

USDCAD Open 1.2798-02, Overnight Range 1.2781-1.2827, Previous close 1.2823, WTI open $67.06, Gold open $1726.24

The Canadian dollar is sinking under the weight of sharply lower oil prices, a bout of negative risk sentiment, and broad US dollar demand.

USDCAD see-sawed in a 1.2781-1.2227 range overnight, with prices trading higher in early NY markets, coinciding with a drop in crude.

West Texas Intermediate (WTI) bounced in a $65.46-$67.31/b band, with prices sliding toward the session low in early NY trading. Opec and Russia are expected to announce the January production quota today. They are supposed to increase crude production, but the cartel is concerned about the latest travel bans stemming from the COVID-19 Omicron variant. There is no point in raising production if demand is going to fall.

In addition, Opec members are annoyed that the US and others disrupted the market by tapping Strategic Petroleum Reserves to help lower prices.

The Canadian dollar is also under pressure from concerns that the Fed will be raising interest rates sooner than anticipated. Tuesday, Fed Chair Jerome Powell said that the Fed’s tapering program could end sooner than expected due to more persistent inflation.

Wednesday, he reinforced his hawkish shift when asked if he still believed recent price increases are not particularly large or persistent. He answered, No, that is no longer my view.”

Those comments, plus news of the first US Omicron variant discovery, drove Wall Street stocks lower and boosted the US dollar, which undermined the Canadian dollar in the process.

The Omicron news comes at a time when liquidity in global markets starts to recede as the holiday season and year end approaches.

Global stock markets have recorded solid gains in 2021, and traders are eager to protect those profits, which exacerbates selling pressures.

FX markets are likely to remain inside this week's ranges until tomorrow's US employment report. Nonfarm payrolls are expected to rise 550,000 in November, with the unemployment rate falling to 4.5% from 4.6%. Higher than expected job gains will support calls for a May 2022 rate increase.

Canadian dollar traders also have the domestic employment report. Canada is expected to have gained 35,000 jobs while the unemployment rate slipped to 6.6% from 6.7%.

US jobless claims is the only data of note today.
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