Canadian Dollar Update, August 16, 2021 – Canadian Dollar Consolidates Friday’s Loss
USD/CAD Open: 1.2546-50, Overnight Range: 1.2514-1.2551, Previous Close: 1.2516
WTI Oil is at $67.39 and gold is at $1,789.10. US markets are mixed today.
For today, USD resistance is at 1.2587. Support is at 1.2557.
• Chinese data weaker than expected
• Global equities fall as risk sentiment sours
• US dollar opens in NY with minor bid tone
The Canadian dollar was swamped by a wave of negative risk sentiment washing over markets. A slew of bad-news headlines led traders to buy US dollars and Japanese yen as safe-havens. Global equity indexes slumped, and Wall Street is poised to open in negative territory.
Traders were spooked after news the Taliban regained control of Afghanistan, despite the efforts of US, UK, Canadian, and other allied troops to turn the country into a western-style democracy.
Recurring coronavirus Delta-variant outbreaks in many regions have caused new restrictions to be implemented, which suggests global growth may slow. Australia and Japan have extended lockdowns, while US officials discuss the need for a third COVID-19 shot.
Markets were also unnerved when Chinese Retail Sales and Industrial Production reports were sharply weaker than forecast. China Retail sales rose 8.5% y/y, a solid result, but a lot slower than the 12.1% seen in June. Industrial Production rose 6.4% y/y compared to 8.3% in June. Analysts suggest the weaker performance was due to renewed coronavirus outbreaks.
EURUSD rallied Friday after the US Michigan Consumer Sentiment Index was weaker than expected. The result implied the Fed would be in no hurry to tighten rates. EURUSD broke above resistance at 1.1770 but the rally stalled at 1.1800 and prices retreated to 1.1768 in NY.
GBPUSD traded in a 1.3840-1.3877 range, with prices weighed down by EURGBP demand. Prices continue to be supported by the belief the BoE will hike rates while the ECB will maintain its accommodative monetary policy stance.
USDJPY dropped to 109.27 from 110.40 Friday, coinciding with a steep slide in US 10-year Treasury yields which fell to 1.277% from 1.367% Friday. Japan is also suffering from restrictive measures being imposed due to spreading delta-variant COVID 19.
AUDUSD erased all of Friday’s gains, falling from 0.7380 to 0.7327 in NY due to fears of a domestic economic slowdown due to COVID-19, weak Chinese data, and NZDAUD demand ahead of the RBNZ monetary policy meeting Wednesday.
The US and Canadian economic calendars are light. Canadian dollar traders are looking ahead to Wednesday’s inflation report. Canada CPI is expected to have risen 3.4% y/y in July.
Today’s Suggested Range USD/CAD: 1.2500 – 1.2600