CAD Cannot Immune to Bearish Oil Prices

Joseph R. Biden pledged in the debate last week to transition away from the oil industry as the sector has caused serious pollution. Bidens campaign tried to downplay it immediately, saying he was merely stating that he would phase out tax subsidies for the oil industry. But Trump kept sniping at Biden's gaffe, arguing that the US is the world's largest oil producer while the sector is arguably the economic lifeline of some U.S. states. Anyway, Biden, the Democratic candidate, clearly prefers weak oil prices so as to combat Russia and even the states of Texas, Pennsylvania, Oklahoma and Ohio which support the Republicans.

Besides Biden's verbal slip-up, Europe's resurgent coronavirus outbreak also weighs on oil prices. The bloc is likely to enforce mass closures ahead of the second outbreak, which may hinder local transportation and sharply drag down oil demands. European stocks widely slumped in the wake of the announcements from Germany and France about national lockdowns on October 28. As beleaguered by the two negatives, oil prices have got into a position where has little chance to rally. With $36.15 and $34.37 two major support lying at the bottom of the WTI uptrend, a breach below the floor ($34.37) may pave the way to challenge the psychological barrier of $30.

At the same time, the falling prices also encumber the oil-linked Canadian dollar. The Bank of Canada decided on an unchanged rate at the meeting on October 28 but sent dovish signals in the post-meeting statement. Although the bank said the rate would be on hold until 2022, traders believe that monetary easing measures such as negative rates still could be taken for economic stimulus if the countrys economy receives further hit from falling oil prices. With that said, the Canadian dollar now sees a gloomy outlook under the impact of falling oil prices.