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Canadian Dollar Update August 16, 2019 – Canadian Dollar pressure by external issues

USD/CAD Open: 1.3312-1.3313 Overnight Range: 1.3285-1.3324

Oil is at $54.46 and gold is at $1,524. US markets are higher today.

The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3327. Support is at 1.3282.

The Canadian dollar is closing out the week a tad worse for wear, and it is due to factors beyond its control. The currency has been whipped about by lightning-quick shifts in global risk sentiment arising from Washington, Beijing and the UK, alongside top-tier G-10 economic data.

The Canadian dollar and British pound were the only currencies to gain against the US dollar overnight. The Australian dollar was unchanged and the rest lost ground. JPY and CF weakened as risk aversion fears eased.

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It has been a choppy week. President Trump caused a hoopla in financial markets on August 13. The imposition of 10% tariffs on many Chinese goods scheduled for September 1, would be put off until December 15. According to the Office of the Trade Representative, some of the products impacted by the delay included cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing. Some analysts believe Trump blinked. They think he toned down his rhetoric because China didn’t seem phased by his antics. Also, the tariffs were negatively impacting manufacturers, retailers and consumers. A few months ago, the New York Fed posted a study that claimed US tariffs added $831.00 in additional costs to the average household.

Other analysts believe the tariff delay was another “carrot” in President Trump’s “carrot and stick” approach to the trade negotiations. Whatever the reason, the news turned risk-off sentiment on August 12 to risk-on sentiment on August 13. The Canadian dollar sank on Monday and rallied on Tuesday but took a turn for the worse on Wednesday.

President Trump was quiet, so traders focused on economic data, and they didn’t like what they saw. Weaker than expected China Retail Sales and Industrial production data got analysts talking about slowing global growth and an increased risk of a recession in some regions. They got even more nervous after German Q2 GDP rose just 0.4% q/q compared to 0.7% q/q previously. The negative sentiment fueled selling of EURUSD, which undermined the Canadian dollar, at the same time.

Things got worse after the UK posted Brexit-defying, better than expected CPI and PPI reports. GBPUSD soared which fueled EURGBP selling, exacerbating the Euro sell-off.

The bond yields, which were already soft, started to fall and the yield curve inverted. That is when US-10-year Treasury yields drop below that of the US 2-year Treasury yield.

Yesterday, US economic data was mostly better than expected, led by a robust jump in July Retail Sales and the Philadelphia Fed Manufacturing Index. The data served to ease US recession fears and provided support for US Treasury yields. The Canadian dollar finished close to unchanged compared to where it started the day.

Today, the only data of note is the Michigan Consumer Sentiment Index.

Today’s Suggested Range USD/CAD: 1.3270 – 1.3370

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By KBFX | August 16, 2019 | Daily Update | 0 comments