Canadian Dollar Update, August 11, 2021 – Canadian Dollar Awaiting US Inflation
USD/CAD Open: 1.2534-38, Overnight Range: 1.2519-1.2544, Previous Close: 1.2519
WTI Oil is at $67.99 and gold is at $1,750.40. US markets are mixed today.
For today, USD resistance is at 1.2542. Support is at 1.2467.
• FX traders sidelined ahead of US CPI (forecast 5.3% y/y)
• US spending bill euphoria undermined by COVID-19 delta-variant outbreaks
• Canadian dollar opens with gains compared to Tuesday’s opening level
The Canadian dollar traded sideways in an uneventful overnight session. Traders did not want to get involved ahead of today’s US inflation data, which has the potential to cause some fireworks, especially if the results are higher than expected.
July CPI is expected to rise 5.3% y/y and 0.5% m/m compared to June’s result of 5.4%, and 0.9%. The results are more important than usual as they may change the tapering narrative in 2021 from just speculation to a certainty.
A slate of Fed speakers including Fed Presidents from Chicago, Atlanta, Richmond, Kansas City, and a Fed Governor have suggested that the US economic recovery is fast-approaching the “substantial further progress” milestone, that Fed Chair Jerome Powell said needs to be met before tapering of QE purchases can begin. Chicago Fed President Charles Evans appears to agree. He suggested tapering could start by the end of December. There is more Fed-speak on tap today.
The Democrat controlled US Senate passed a new $3.5 trillion budget plan, in addition to the $1.0 trillion infrastructure plan announced yesterday. The news was met with a collective “meh,” and US equity futures are trading unchanged.
Canadian dollar direction continues to be determined by broad US dollar sentiment and not by domestic economic data. That is just as well, as there are no Canadian economic reports available this week. However, the Canadian dollar has received a modicum of support from the rise in oil prices. West Texas Intermediate (WTI) climbed from $65.20/barrel to $68..76 overnight, which underpinned the Loonie.
EURUSD barely budged. It is sitting near the bottom of its overnight 1.1707-1.1724 range, awaiting today’s US CPI data. German July CPI was unchanged at 0.9% m/m.
GBPUSD traded lower, falling from 1.3840 to 1.3804 on the back of broad US dollar strength. The GBPUSD technicals are bearish while prices are below 1.3940, looking for a break of 1.3790 targeting 1.3710.
USDJPY extended gains to 110.78, in tandem with US 10-year Treasury yields climbing to 1.37%.
AUDUSD and NZDUSD traded quietly and defensively in narrow ranges. Australia’s August Consumer Confidence report was -4.4 compared to 1.5% previously, due to spreading COVID-19.
Today’s Suggested Range USD/CAD: 1.2460 – 1.2560