Canadian Dollar Update, August 5, 2021 – Canadian Dollar Gains Limited by Sliding Oil Prices
USD/CAD Open: 1.2511-15, Overnight Range: 1.2509-1.2546, Previous Close: 1.2542
WTI Oil is at $68.67 and gold is at $1,805.10. US markets are higher today.
For today, USD resistance is at 1.2532. Support is at 1.2438.
• Bank of England leaves rates unchanged
• Rising US crude inventories drive WTI lower
• Fed speakers put taper talk on agenda
Canadian dollar trading is choppy and directionless inside a USDCAD uptrend channel that has been intact since June 4. The Canadian dollar dropped as West Texas Intermediate (WTI) oil prices declined.
Yesterday, the Energy Information Administration reported US crude inventories rose 3.62 million barrels in the week ending July 30. That news and increased Opec production fueled fears that supply would outstrip demand, especially if global economic growth slows.
Overnight, Canadian dollar traders seemingly ignored oil price movements and tracked commodity currency price action. AUDUSD and NZDUSD eked out gains, and the Canadian dollar climbed as well.
However, the price action is just noise, as traders await US and Canadian employment data. US nonfarm payrolls are expected to rise 870,000, while Canada jobs should increase by 177,000.
The US employment data has an increased focus in light of recent comments from Fed officials. Vice-Chair Richard Clarida surprised some analysts yesterday when he predicted that the necessary conditions needed to raise interest rates might be met by the end of 2022.
Dallas Fed President Richard Kaplan was more specific. He said the Fed should begin tapering if the July and August employment reports are as robust as the June data.
Both those comments gave the greenback a boost yesterday, and it consolidated those gains overnight.
Asia traders were extra cautious due to new restrictions following rising coronavirus delta variant cases.
The European session was uneventful despite the Bank of England (BoE) monetary policy meeting. The BoE left monetary policy unchanged. Interest rates stayed at 0.1%, and QE is unchanged, although the vote was vote not unanimous.
The statement noted, “UK GDP is projected to recover further over the remainder of the year, reaching its pre-pandemic level in 2021 Q4, with demand growth boosted by a waning impact from Covid.”
The statement also warned of rising inflation, saying, “CPI inflation is projected to rise temporarily in the near term, to 4% in 2021 Q4.”
The BoE meeting had little impact on GBPUSD trading.
FX traders expect another quiet session today. Canadian Trade and US weekly jobless claims will not spark much interest ahead of Friday’s Canadian and US employment reports.
Today’s Suggested Range USD/CAD: 1.2430 – 1.2530