Canadian Dollar Update August 19, 2019 – Canadian Dollar opens with little change
USD/CAD Open: 1.3269-1.3270 Overnight Range: 1.3250-1.3277
Oil is at $55.82 and gold is at $1,508. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3290. Support is at 1.3230.
The Canadian dollar opened in Toronto unchanged from where it closed on Friday. Even so, it managed to outperform the rest of the G-10 majors except for the Euro. The Canadian dollar is getting support from Friday’s soft US economic data. Building Permits and Housing Starts were mixed, but the Michigan Consumer Sentiment Index was very soft. The data raised the odds for a September 18 rate cut to 92.7%.
Earlier last week, Canadian existing home sales data came in higher than expected, which suggests the domestic economy is growing faster than the Bank of Canada forecast. That suggests the Bank of Canada will have a harder time justifying a rate cut, even though the rest of the G-10 central banks are in easing mode.
CNBC analysts suggest China’s latest interest rate policy tweak is a rate cut. On Saturday, the People’s Bank of China announced changes to the Loan Prime Rate. The LPR will be linked to rates sets during open market operations and reported on the 20th of each month.
Equity traders loved the news. The Shanghai Shenzhen CSI 300 index surged 2.17%, lifting Asia and European equity indices in the process. Wall Street is expected to open with triple digit gains today.
The FX market reaction was underwhelming. All the majors opened very close to their closing levels and traded in narrow, well-defined ranges.
USDJPY climbed from 106.25 to 106.68 on the back of the improved risk sentiment and a 4.75% surge in US 10-year Treasury yields. The Japanese trade surplus narrowed sharply, which also supported prices.
AUDUSD managed to outperform NZDUSD thanks to China’s interest rate tweak as the Reserve Bank of New Zealand is viewed as more dovish than the Australian central bank.
EURUSD traded quietly overnight and opened close to unchanged. Prices flat-lined in Asia and then inched higher in Europe, supported by fresh talk of fiscal stimulus in Germany and profit-taking after making a new 2019 low on Friday.
GBPUSD enjoyed a profit-taking rally. Prime Minister Boris Johnson’s visit to Germany and France raised hopes that it would yield some EU concessions, reducing the risk of a hard Brexit. However, it may just be noise as the Irish border issue is the sticking point.
Canadian dollar traders are looking ahead to top tier data available this week Wednesday, Canada’s inflation report is released, and Friday Retail Sales are on tap. Better than expected data will boost the currency while weak data will lead to selling pressures.
Traders are awaiting Friday’s speech by Fed Chair Jerome Powell and the G-7 meeting August 24-27.
Today’s Suggested Range USD/CAD: 1.3220 – 1.3320