Canadian Dollar Update, August 25, 2020 – Canadian Dollar trading sideways
USD/CAD Open: 1.3211-15, Overnight Range: 1.3177-1.3239
WTI Oil is at $43.39 and gold is at $1,922.80. US markets are mixed today.
For today, USD resistance is at 1.3228. Support is at 1.3174.
• US/China optimistic about Phase 1 Trade deal
• EURUSD climbs after IFO Survey data
• Canadian dollar tracking EURUSD moves
The Canadian dollar sank to the bottom of its two-week range overnight, then rallied. USDCAD jumped from a low of 1.3135 yesterday to 1.3236 in the late afternoon, as prices tracked a broad, but relatively shallow US dollar rally. The short term USDCAD technicals are bearish, but the bears have been unable to break strong support in the 1.3130 area.
Trade negotiations are a key theme in FX markets, and they were at the forefront again overnight. US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, and Chinese Vice Premier Liu He spoke yesterday.
The chat was characterized by Mr. Lighthizer’s office as a “constructive conversation.” The Trade Representative office press release said: “Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement.”
US and Canada trade relations are under duress. The Americans are thoroughly annoyed that the World Trade Organisation (WTO) had the audacity to declare that the Americans were wrong to impose softwood lumber duties on Canadian softwood lumber. Trade Representative Lighthizer said “This flawed report confirms what the United States has been saying for years: the WTO dispute settlement system is being used to shield non-market practices and harm US interests.”
The Americans have already slapped punitive tariffs on imports of Canadian aluminum, and the now there is an elevated risk of tariffs on softwood lumber.
The news had zero impact on USDCAD trading, but over time the risk of a new US/Canada trade war will limit Canadian dollar gains.
FX traders are biding their time ahead of a series of speeches from key central bankers on Thursday.
Bank of England Governor Andrew Bailey, Bank of Canada Governor Tiff Macklem, and Federal Reserve Chairman Jerome Powell are on tap. Mr. Powell’s speech could be a game-changer for financial markets.
The Fed President is expected to announce major policy initiatives, designed to boost inflation. The Consumer Price Index has been languishing well below the Fed’s target of 2.0%. The current inflation levels are a handicap to managing new financial problems.
US Consumer Prices and Case-Shiller Home Price data are due today.
Today’s Suggested Range USD/CAD: 1.3160 – 1.3260