- USD/CAD may attract bids after overstepping 1.2900 on weak oil prices.
- OPEC and its allies have agreed on increasing oil production.
- The loonie has underperformed against its counterparts amid the risk-on impulse.
The USD/CAD pair has witnessed some long liquidation from 1.2900 as safe-haven assets lose their appeal. The US dollar index (DXY) slipped below 98.00, which triggered the demand of all risk-perceived currencies. However, the loonie has underperformed in comparison with its counterparts and had failed to bring a material sell-off in the USD/CAD pair.
The major reason behind the underperformance of the loonie is the sell-off in the West Texas Intermediate (WTI) oil. The oil prices have fallen like a house of cards after hitting multi-year highs at $126.51. Investors dumped the black gold after the US urged the oil producers to increase their production. In response to that, OPEC member UAE favored pumping more oil to fix the galloping deviation in the demand-supply mechanism.
"We favor production increases and will be encouraging OPEC to consider higher production levels," tweeted by the UAE Embassy in Washington.
It is worth noting that a few members of OPEC have spare capacity to explore more oil, which can diminish the impact of the ban on the Russian oil supply. Investors should be aware of the fact that the US has prohibited the imports of Russian oil against its invasion of Ukraine.
Meanwhile, the oil stockpiles by Energy Information Association (EIA) remained at -1.863M, lower than the market consensus of -0.657M but outperformed the prior figure of -2.597M.
On the DXY front, the index is hovering around 98.00 and is likely to consolidate further as investors are waiting for US inflation numbers, which are due on Thursday. While the loonie docket will report the Unemployment rate on Friday.
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