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Canadian Dollar Update August 6, 2019 – Canadian Dollar pressured

USD/CAD Open: 1.3229-1.3230 Overnight Range: 1.3187-1.3233

Oil is at $54.84 and gold is at $1,477. US markets are mixed today.

The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3250. Support is at 1.3201.

The Canadian dollar is being pressured. The simmering China/US trade dispute boiled over into a full-scale trade war yesterday. China responded to President Trump’s threat of an additional 10% tariff on another $300 billion of Chinese imports into the US. Beijing announced that they would suspend all purchases of American agricultural products. They said it was “a serious violation of the consensus of the heads of state of the two countries”. Then they upped the ante. The Peoples Bank of China (PBoC) allowed their highly managed currency, USDCNY, to break above the psychologically important 7.00 level, which hadn’t happened in eleven years.

China’s overt defiance angered President Trump. The Treasury Department issued a press release titled “Treasury Designates China as a Currency Manipulator”.

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Financial markets reacted predictably. Wall Street stocks tumbled, and safe-haven currencies soared. USDJPY plunged to 105.58 from 106.20 and USDCHF fell from 0.9839 to 0.9704. US Treasury yields plummeted as well. The Canadian dollar avoided the brunt of the risk aversion sentiment.

A sense of calm returned to markets overnight, and risk aversion sentiment gave way to modest risk-seeking demand. USDJPY rebounded, rising from a low of 105.58 to 107.08 coinciding with a jump in 10-year US Treasury yields from 1.68% to 1.74%.

AUDUSD was hammered before prices bounced on the back of the rebound in risk sentiment. The Reserve Bank of Australia left the overnight rate unchanged, preferring to wait and see how its June and July rate cuts impact the economy. The statement set the table for additional easing. It said, “The persistent downside risks to the global economy combined with subdued inflation have led a number of central banks to reduce interest rates this year, and further monetary easing is widely expected”.

EURUSD got a lift from safe-haven demand. However, mixed to soft Eurozone and German data combined with expectations for European Central Bank easing in September, capped gains. Prices have since retreated to 1.1187 in Toronto trading today.

The Canadian dollar is consolidating losses after USDCAD broke above resistance at 1.3190. Risk aversion sentiment rising from the China/US trade war is being offset by recent better than expected domestic economic data.

The US and Canadian economic calendars are light today. Wall Street moves, and trade headlines will dictate FX price action.

Today’s Suggested Range USD/CAD: 1.3180 – 1.3280

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By KBFX | August 6, 2019 | Daily Update | 0 comments