Canadian Dollar Update, August 10, 2021 – Canadian Dollar Idles
USD/CAD Open: 1.2572-76, Overnight Range: 1.2557-1.2587, Previous Close: 1.2580
WTI Oil is at $68.54 and gold is at $1,724.40. US markets are mixed today.
For today, USD resistance is at 1.2597. Support is at 1.2528.
• Soft oil prices weigh on Loonie
• German ZEW data adds to pressure on EURUSD
• Empty US data calendar leaves FX directionless
The Canadian dollar is idling in an uninspiring FX summer market. The US and Canadian economic calendars are devoid of actionable, top-tier economic data until Wednesday’s US inflation report. US CPI is expected to be 5.3% y/y in July, a tick softer than June’s torrid 5.4% y/y pace.
Richmond Fed President Thomas Barkin said interest rates would rise “when inflation hits 2%, which I think you can argue it already has, and it looks like it is going to sustain there”. Atlanta Fed President Raphael Bostic appears to agree. He believes inflation reached its core target of 2.0% in May.
Those comments served to boost US 10-year Treasury yields, which climbed to 1.329% today, from 1.270% yesterday.
Traders are concerned about a hawkish Fed raising interest rates sooner than expected. However, they are just as worried about another global growth slowdown due to the spreading coronavirus delta-variant in Asia.
The Canadian dollar is at the mercy of the shifting risk sentiment, and sliding oil prices adds another layer of uncertainty. West Texas Intermediate (WTI) plunged from $74.15 on July 30 to $65.10 yesterday, a 12.2% drop. In June and July, many bank analysts were forecasting $100.00/barrel for WTI. The spread of the coronavirus in Asia sparked a re-assessment of the view and fueled selling. The magnitude of the move may be exaggerated because of thin summer markets.
WTI has support from geopolitical issues. North Korea is making noises around the annual South Korea and US war games. Germany, Australia, the UK, and the US are sailing deep into the South China Sea to remind China that those are international waters. Iran and Iran proxies are attacking Israeli shipping in the Arabian Sea. Any of these events could spark a risk aversion event.
EURUSD is on the defensive after the German ZEW Economic Sentiment plunged 22.9 points to 40.4 from 63.3 in July. ZEW officials suggest the results point to German economic growth risks, which is due to the coronavirus.
GBPUSD caught a bid in Europe and climbed to 1.3873 from 1.3835, mostly due to EURGBP selling when EURUSD broke below 1.1730 support.
USDDJPY rallied from 110.28 to 110.54, supported by higher US Treasury yields and broad US dollar strength.
Today’s Suggested Range USD/CAD: 1.2500 – 1.2600