Canadian Dollar Update, August 21, 2020 – Canadian Dollar trading sideways
USD/CAD Open: 1.3194-98, Overnight Range: 1.3159-1.3234
WTI Oil is at $41.86 and gold is at $1,950.20. US markets are mixed today.
For today, USD resistance is at 1.3263. Support is at 1.3143.
• Economists predict huge gain for Canada Retail Sales
• Eurozone data sinks EURUSD, EU/UK trade talks disappointment sinks GBPUSD
• US dollar claws out gains and opens higher in Toronto
The Canadian dollar story is that there isn’t one. The domestic currency direction is dictated by broad US dollar sentiment. That sentiment was bullish overnight due to Eurozone data, Brexit talks, and position adjusting ahead of the weekend.
Canada Retail Sales data jumped 23% m/m in June. FX traders should not care as the gain is all because of pent-up demand from coronavirus lockdown measures. It is not because the Canadian economy is on fire.
The Canadian dollar is under modest pressure in early Toronto trading due to a mild bout of “risk-off” sentiment wafting through markets. European equity indexes are in negative territory. US equity futures gave up earlier gains and are pointing a lower open for Wall Street. The US dollar gains are hurting gold prices. XAUUSD continued to slide from Tuesday’s peak level of $2014.75 and is testing support in the $1920.00 region. Oil prices couldn’t hang on to gains after data showed US crude inventories declined last week.
Eurozone data sparked the wave of US dollar demand. Euro area PMI reports were weaker than expected, raising concerns that the economic rebound was stalling. EURUSD dropped from 1.1882 to 1.1769 in Toronto trading. The fall may have been exaggerated by thin August markets.
GBPUSD plunged from 1.3254 to 1.3103 and could fall further. News that Brexit talks stalled spooked traders. EU Chief Negotiator Michel Barnier said that a deal seems unlikely. He said, “Too often this week it felt as if we were going backwards more than forwards. Given the short time left, what I said in London in July remains true, today at this stage, an agreement between the UK and EU seems unlikely.”
UK negotiators blamed the EU for the impasse. UK Chief Negotiator David Frost complained that the EU was making it “unnecessarily difficult” because they insisted fisheries issues must be resolved before other areas can be discussed.
AUDUSD and NZDUSD traded quietly in narrow ranges. NZDUSD traders ignored comments by RBNZ Deputy Governor Young Ha who warned that economic downside risks exceeded upside risks, and made a case about the effectiveness of negative interest rates.
Today’s US data includes Markit PMI data and existing home sales, neither of which will be a factor for FX.
Today’s Suggested Range USD/CAD: 1.3140 – 1.3240