Canadian Dollar Update – Canadian dollar lags significantly
USD/CAD Open: 1.3775-79, Overnight Range: 1.3711-1.3786, Previous Close: 1.3745
WTI Oil open at $83.31 and gold open at $1,821.94. US markets are lower today.
For today, USD resistance is at 1.3714. Support is at 1.3698.
- Challenger Job cuts and weekly jobless claims on tap.
- Yield curve inversion/recession talk resurfaces.
- Canadian dollar underperforms as US dollar corrects.
The Canadian dollar is the basket case of the G-10 currencies. The US dollar retreated against the majors except for the Canadian dollar, which lost 0.58% since Wednesday’s open. Much of the underperformance can be attributed to the steep plunge in crude prices.
West Texas Intermediate oil traded negatively on Monday and Tuesday, then accelerated lower on Wednesday after the release of the Energy Information Agency (EIA) weekly petroleum report. The EIA reported that gasoline inventories rose by 275 million gallons due to weak gasoline demand. That news, coupled with renewed US recession chatter, more than offset the OPEC announcement of an unchanged oil policy.
The Canadian dollar is also being pressured by bullish USDCAD technicals. The recent break above the 1.3640-1.3660 area breached a significant resistance level and set the stage for further gains toward 1.4000.
The US dollar sell-off appears to be an overdue correction, necessitated by Relative Strength Indicators (RSI) suggesting that the US 10-year Treasury yield had become extremely overbought. The subsequent drop from yesterday’s 3.884% peak to 4.711% this morning alleviates the situation considerably.
Nevertheless, the price action in bonds and FX is merely noise ahead of tomorrow’s US nonfarm payrolls report.
EURUSD oscillated between 1.0501 and 1.0530. The divergent monetary policies of the ECB and the Fed indicate challenges in moving above the 1.0550 threshold. Germany’s trade data was lackluster, with a monthly decrease of 1.2% in exports for August, and a revised July decline of -1.9%, initially reported as -0.9%.
GBPUSD fluctuated between 1.2116 and 1.2164, with gains constrained by the frail Construction PMI data, which descended to 45 from August’s 50.8. As stated by S&P Global, this denotes the steepest contraction in the construction sector since May 2020.
USDJPY showcased a bearish trend, trading between 148.27-149.13, influenced by the downtrend in U.S. Treasury yields and concerns about potential BoJ FX interventions.
AUDUSD edged upwards within a 0.6318-0.63778 range, with its trajectory largely shaped by the U.S. dollar’s bearish tendencies.
Today’s focal points are the weekly unemployment claims, anticipated to be 210,000, Challenger Job cuts, and comments from a series of Fed officials, including Barkin, Daly, and Mester.