The USD/CAD broke back below 1.4000 for the first time in six sessions on Tuesday as the continuing dissolution of the US labor market failed to excite further risk-aversion fears and the Federal Reserve unveiled a $600 billion lending program for medium sized business part of a $2.3 trillion package to support local and state governments and companies with loans and securities purchases. OPEC and Russia agreed on a tentative production deal which would cut about 10 million barrels a day in May and June. Saudi Arabia and Russia, the largest producers, would reduce their output by 8.5 million a day and all members would cut their supply by 23%, according to news reports. The deal is conditional on Mexico’s approval. Energy Secretary Rocio Nahle Garcia said on Twitter after the Thursday meeting that her country is willing to reduce output by 100,000 barrels far less than the 400,000 assumed in the agreement. This attempt to support oil prices with supply restrictions is far larger than previous efforts by the cartel and is backed by US President Trump. North American shale companies are under severe financial pressure from the more than 50% collapse in crude prices this year. Production costs in the shale fields are generally higher than the more traditional extraction in the Middle East and Siberia. Signs that the pandemic is easing in the US and Europe improved risk sentiment throughout the week. The USD/CAD fell 1.8% and is back to the level of mid-March before the most aggressive Coronavirus inspired fears drove the pair to 1.4668 on March 19, the highest price in four years and the second highest since 2003. The euro gained 1.3% versus the dollar on the week and the USD/JPY was static opening at 108.53 and closing just 10 points lower, though it was down from Monday’s 109.38 high. USD/CAD outlook Economic damage around the world from the public health measures instituted to cope with the Coronavirus has taken concrete shape with the astonishing US and Canadian jobs losses. In the US almost 17 million people, 10% of the workforce, have filed for unemployment insurance in the last three weeks. In Canada one million workers lost their positions in March and the unemployment rate jumped to 7.8% from 5.6%, its highest since February 2011. Market risk is a matter of perception. In the ascending phase of the crisis in early March the extent of the pandemic and its economic effects were largely unknown but subject to the worst interpretations. The US dollar and US assets were, as they have always been, the refuge of choice. The actual job losses in the US and Canada were far higher than expected but they are now known instead of conjecture and if the knowledge is not reassuring is quantifiable. Five factors began to tilt the risk balance away from the US dollar and toward the loonie this week. First, the pandemic has started to moderate in several countries in a fashion that may predict its end. Second, infection, hospitalization and fatality rates in the US are proving to have been widely exaggerated when compared to real numbers and the models have been adjusted lower by large multiples. Third, government support programs from Washington and Ottawa and the Federal Reserve and the Bank of Canada have restored market confidence in the functioning of the financial system and, more hopefully, that some of the economic pain from closures can be mitigated. Fourth, talk in DC is slowly shifting to how and when to reopen the economy. Fifth, the OPEC production deal, if approved, should put a floor under crude prices until the reviving global economy increases demand. None of these developments are assured but if they continue the US dollar’s risk premium, in general and against the Canadian in particular, will slowly drain away and the stage will be set for Dollar Canada to return to pre-crisis levels. The USD/CAD is supported at 1.3950, 1.3800 and 1.3660 but the rapid nature of the price movement in the last month and the fundamental motivation means that these levels will not endure much pressure. The same stipulations apply to the resistance lines at 1.4075, 1.4180, 1.4300 and 1.4380.