OPEC Production Limit – A Look at OIL and USD/CAD

September 29, 2016

OPEC has now announced a deal to limit production has been reached. The first production cut of its kind in nearly a decade highlights the symbolic significance of what has just happened, but the question for traders remains ‘what’s the difference between this and any other deal that has been reached, argued over and eventually renegged on?


OIL 4 Hourly:
Click on chart to see a larger view.

According to OPEC sources, the production numbers will see a cut by 750k barrels to 32.5 million barrels a day. For context, OPEC’s latest monthly oil report pegged current member output at 33.25 million barrels a day. The cut won’t take place until November and a committee will be set up to determine the level of reduction for each member.

Now just read that again… So oil has just ripped faces off shorts, busting through both daily horizontal and 4 hour trend line resistance, yet they still have to SET UP A COMMITTEE to determine the numbers? There isn’t even a committee there, they still have to set it up! Is this a joke?

This is a gift, is what it is. You cannot go wrong continuing to short these short term, headline driven, RIDICULOUS pops.

Here’s Scott Cockerham, managing director at Huron with my quote of the day:

“A 2% cut in cartel production is a lawn chair off the Titanic with regards to global supply.”


Now of course when Oil moves, the highly correlated CAD moves with it. Meaning that USD/CAD moves in the inverse direction.

USD/CAD 4 Hourly:
Click on chart to see a larger view.

This is an interesting level because it’s a confluence of higher time frame horizontal resistance, as well as that short term trend line re-test. For me, it was never realistic from a risk management perspective to short that level blindly, but that failure could offer some tight risk reward selling opportunities on a pullback if it comes.

Technicals might be there, but this goes against every common sense thing I have said about how unreliable and downright ridiculous OPEC deals are. Just remember this and keep in mind the higher time frame support levels that will soon come into play again.

USD/CAD Weekly:
Click on chart to see a larger view.

I’ve included the weekly chart here to put the 4 hour levels that we’re talking about in perspective.

Where do you see the greatest opportunity?


On the Calendar Thursday:
JPY BOJ Gov Kuroda Speaks

USD Final GDP q/q
USD Unemployment Claims

Experience true ECN, transparent Forex trading with Vantage FX – Start today!

Dane Williams – @VantageFX

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