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Canadian Dollar Update, April 28, 2020 – Canadian Dollar soars

USD/CAD Open: 1.3953-57, Overnight Range: 1.3935-1.4073

WTI Oil is at $12.69 and gold is at $1,720.60. US markets are mixed today.

For today, USD resistance is at 1.4021. Support is at 1.3961.

• Risk sentiment improves as COVID-19 restrictions start to ease
• WTI continues to be pressured by oil storage concerns
• US Dollar loses ground across the board, overnight

The Canadian dollar soared in a somewhat uneven trading session overnight. Canadian dollar sellers were evident in Asia, in part because of NZDUSD selling pressures. The New Zealand currency came under pressure after an economist at Westpac Bank predicted the Reserve Bank of New Zealand would cut the Overnight Cash Rate (OCR) from 0.10% to negative territory before year-end. That news came on the heels of other technical FX trading strategies that suggested buying AUDCAD.

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Canadian dollar selling pressure abated suddenly when the European session got started. Suddenly everyone wanted it. The currency recouped all its Asia losses and then accelerated higher just before Toronto opened. The USDCAD plunge from 1.4071 to 1.3948, was exacerbated by stop-loss selling on the break of the 1.3990-1.4005 support area.

The Canadian dollar rally is all due to month-end portfolio rebalancing flows, as mangers get a jump on Thursday’s official 11:00 am EDT month-end fixing. Many equity portfolio managers need to readjust their hedges at the end of every month to ensure they are in compliance with their mandates. The April 10%+ rally in the S&P 500 index suggests managers will need to sell US dollars.

The Canadian dollar rally was part of a broad US dollar sell-off overnight, and the bulk of the moves can be attributed to portfolio rebalancing flows. However, the easing of lockdown restrictions in Spain, France and Italy has improved FX risk sentiment, as well. GBPUSD climbed to 1.2517 from 1.2406, despite a very weak CBI Distributive Sales survey and ongoing concerns about the EU/UK trade talks.

EURUSD tracked Sterling higher. Prices rose steadily from 1.0657 to 1.0733 but retreated in early Toronto trading. Sweden’s Riksbank left interest rates unchanged at 0%. The governor said he didn’t think further rate cuts would help stimulate the economy, which contradicts the ECB outlook.

Traders are looking ahead to the FOMC meeting and do not expect much of a show. The Fed acted aggressively and often in March, which suggests that Wednesday’s meeting will take a “wait and see” approach.

Traders will continue to focus on month-end portfolio flows and economy re-opening headlines today while ignoring US and Canadian economic data.

Today’s Suggested Range USD/CAD: 1.3900– 1.4000

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By KBFX | April 28, 2020 | Daily Update | 0 comments