Canadian Dollar Update, August 20, 2021 – Canadian Dollar in Free-fall
USD/CAD Open: 1.2926-30, Overnight Range: 1.2828-1.2947, Previous Close: 1.2828
WTI Oil is at $62.62 and gold is at $1,785.90. US markets are mixed today.
For today, USD resistance is at 1.2898. Support is at 1.2811.
• FOMC minutes warn of tapering by Christmas
• Global equity and commodity markets sink
• US dollar opens with gains across the board
The Canadian dollar was smashed overnight but is attempting to pick up the pieces in early NY trading. USDCAD closed at 1.2828 yesterday and then climbed steadily until finding resistance in the 1.2950 area. Prices inched lower and are trading at 1.2910 as of 7:30 am ET.
Oil prices fell over 15% in August due to rising Opec production and fears of lower demand from a slowing global economy. The oil price drop supported the risk-aversion fueled USDCAD rally.
Additional Canadian dollar pressure stems from a spike in negative risk sentiment that sparked a stampede into safe-haven US dollars and Japanese yen. Rising numbers of COVID-19 delta-variant cases around the world which are occurring in people even with two vaccines unnerved traders. The virus spread risks another global economic slowdown as countries like Japan, Australia, and New Zealand reimpose strict lockdown measures.
Australia reported another 642 cases and extended the lockdown in Sydney until the end of September. New Zealand extended the nation-wide lockdown until next Wednesday. The New Zealand lockdown forced the RBNZ to delay a planned 0.25% rate hike. Today, RBNZ Governor Orr said that COVID-19 along wouldn’t derail its rate hike agenda, but NZDUSD still remained defensive.
China’s regulatory clampdown and reports authorities plan to return the country to its communist roots exacerbated global slowdown fears, and supported risk aversion trades.
The Peoples Bank of China left interest rates unchanged at today’s monetary policy meeting, which was expected.
The major Asia equity indexes closed deep in the red, and the major European bourses are underwater. Dow Jones Industrial Average and S&P 500 futures are down but off their worst levels. Gold prices are marginally higher and US Treasury yields are steady.
Canada July Retail Sales are expected to rise 4.4% m/m, well above the 0.4% increase in June. The data is unlikely to be a factor for FX markets due to the focus on the Fed’s taper plans.
The FOMC minutes released Wednesday had a hawkish bias which appears to contradict Chair Powell’s statements insisting the Fed is a long way from achieving its dual mandate.
There are not any top tier US economic reports today leaving traders to shift their focus to Fed Chair Powell’s speech at the Jackson Hole symposium.
Today’s Suggested Range USD/CAD: 1.2800 – 1.2930