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Canadian Dollar Update, April 16, 2020 – Canadian Dollar playing defence

USD/CAD Open: 1.4105-09, Overnight Range: 1.4062-1.4136

WTI Oil is at $19.90 and gold is at $1,757.40. US markets are mixed today.

For today, USD resistance is at 1.4170. Support is at 1.4029.

• Bank of Canada expands quantitative easing program
• Global oil glut weighing on crude prices
• President Trump expected to provide details for plan to re-open US economy
• US weekly jobless claims expected to increase by 5.1 million

The Canadian dollar finally found some support overnight, after free-falling since Tuesday, and it had nothing to do with any domestic reasons. Canadian dollar direction, like the rest of the G-10 majors, continues to be dictated by broad US dollar sentiment. That sentiment shows a preference to buy greenbacks.

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USDCAD touched 1.3865 on April 14 and hit 1.4135 overnight as weak crude oil prices, and bullish US dollar sentiment underpinned prices.

Wednesday’s Bank of Canada policy meeting was a non-event for FX traders, as G-7 central bank monetary policy initiatives are well-coordinated. The BoC cut rates three times in March which removed the impetus for any rate action. They were content to leave rates unchanged, noting that the current rate of 0.25 percent, is considered “its effective lower bound.”

The BoC announced an expanded quantitative easing program. They will increase the amount of Treasury Bills bought at auction and announced new Provincial and Corporate bond buying programs.

The BoC said that they were not providing their usual forecasts but instead offered forecast ranges. They said, “Bank analysis of alternative scenarios suggests the level of real activity was down 1-3 percent in the first quarter of 2020 and will be 15-30 percent lower in the second quarter than in fourth-quarter 2019”. CPI inflation is expected to be close to 0 percent in the second quarter of 2020. This is primarily due to the transitory effects of lower gasoline prices.

Canadian dollar traders largely ignored the BoC comments and focused on US dollar sentiment. The major US equity indexes were sinking alongside oil prices, which put a risk aversion bias into FX trading. The US Energy Information Administration (EIA) said US crude inventories surged to 19.1 million barrels in the previous week.

The news served to highlight the plunge in global demand because of coronavirus travel restrictions. Oil prices consolidated losses just above yesterday’s low in overnight trading.

FX markets are cautious ahead of this morning’s US jobless claims data, which is expected to show a gain of 5.1 million. If claims exceed last week’s 6.6 million increase, they may throw a wet blanket over hopes that President Trump will be able to re-open the US economy around May 1.

If so, the US dollar will see fresh demand and the Canadian dollar will suffer as a result.

Today’s Suggested Range USD/CAD: 1.4060 – 1.4160

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By KBFX | April 16, 2020 | Daily Update | 0 comments