Canadian Dollar Update October 21, 2019 – Canadian Dollar rising
USD/CAD Open: 1.3132-1.3133 Overnight Range: 1.3098-1.3138
Oil is at $53.08 and gold is at $1,493.00. US markets are higher today.
The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3120. Support is at 1.3084.
The Canadian dollar inched higher overnight, lifted by a modest improvement in global risk sentiment. Brexit and China/US trade talks are the major catalysts for FX moves, and Brexit is slowly coming to a head.
GBPUSD traders focused on this weekend’s “Super Saturday” drama. Prime Minister Boris Johnson planned on bringing his Brexit deal to a vote. His efforts were in vain. Instead, MP’s passed an amendment that forced Mr. Johnson to send a letter to the EU to ask for an extension to the October 31 deadline. GBPUSD crashed at the Asia open, falling from 1.29678 to 1.2876. The retreat didn’t last. UK Foreign Minister Dominic Raab suggested the government had enough votes to get Johnson’s deal passed. GBPUSD rallied to 1.3010 in Europe. There is more to come. The Withdrawal Agreement Bill may be tabled today.
The commodity bloc currencies, which includes the Canadian dollar are benefitting from the improved risk sentiment as the risk of a “no deal” Brexit fades. AUDUSD broke above the July downtrend line with its move above the 0.6830-50 zone. Traders are looking for further gains to 0.7070 supported by hopes for a US/China trade deal.
US/China trade talks showed signs of progress, but there are still plenty of hurdles ahead. For instance, the World Trade Organizations’ recent ruling in favour of China over the US led to China asking for $2.7 billion in retaliatory tariffs. At the same time, US complaints of China human rights abuses casts a pall over the trade negotiations.
NZDUSD is tracking AUDUSD, albeit to a lesser degree. Large short NZDUSD positions that get unwound could accelerate gains. Although, expectations for slowing New Zealand growth may cap any rally.
EURUSD is enjoying the improved risk tone following the Brexit developments. Prices broke above major resistance in the 1.1120 area last week which set the stage for additional gains. The US dollar index (DXY) broke below support at 98.20, which exacerbated bearish US dollar sentiment.
USDJPY is consolidating recent gains in a 108.30-90 range. The currency pair is underpinned by the unwinding of safe-haven trades, in part because of the, reduced risk of a “no-deal” Brexit. The jump in US 10-year Treasury yields from 1.511% at the beginning of the month to 1.773% in early Toronto trading today fueled USDJPY demand.
The Canadian dollar is a beneficiary of the broad US dollar weakness.
Today’s Suggested Range USD/CAD: 1.3080 – 1.3180
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