Canadian Dollar Update, August 14, 2020 – Canadian Dollar fails to break resistance
USD/CAD Open: 1.3241-45, Overnight Range: 1.3206-1.3272
WTI Oil is at $41.94 and gold is at $1,950.80. US markets are mixed today.
For today, USD resistance is at 1.3267. Support is at 1.3228.
• Eurozone geopolitical tensions limit EURUSD gains
• Senior US/China trade officials meet Saturday
• Robust US data could renew risk-on sentiment
The Canadian dollar made another attempt to break USDCAD support in the 1.3190 area, which failed. However, the subsequent bounce stalled at 1.3250, which suggests USDCAD bears are merely regrouping before trying again.
August is known for having poor liquidity and exaggerated, but unstained moves in some currency pairs.
That’s because many senior traders in Europe, the UK and New York, choose to take vacations in August. This year isn’t any different.
Equity market moves are driving US dollar direction. The NASDAQ is at record highs, leading to positive risk sentiment.
Traders may be getting complacent as there are a lot of significant risks lurking in the weeds. Some of those risks include a second wave of the COVID-19 pandemic, the US election, and the prospect of negative interest rates in some regions including Canada, New Zealand, and the US.
China is at the heart of many of the risks. Beijing is feuding with the US, Canada, Australia, New Zealand, Great Britain, and the European Union. They are not afraid to use their trade muscle to make a point, with all the countries except for the US.
China is annoyed at Australia for demanding an independent inquiry into the COVID-19 pandemic. They are also peeved because Australia openly criticized China’s handling of protests in Hong Kong.
Trump is attacking Beijing on all fronts in what many believe is a calculated attempt to distract voters from his bungling of the pandemic response, and a desperate attempt to regain the election lead. The US opposes China’s South China Sea aspirations and is now aiming at Chinese technology companies by banning or forcing a sale of WeChat and Tik Tok.
China is a major source of risk for complacent FX traders.
There is plenty of US data on tap today. Better than expected Michigan Consumer Confidence, Retail Sales, Business Inventories, Capacity Utilization, and Industrial Production, could spark fresh demand for equities, which would support the positive risk environment.
Canadian dollar direction continues to be dictated by US dollar moves while domestic data is ignored.
Today’s Suggested Range USD/CAD: 1.3190 – 1.3290