Canadian Dollar Update December 18, 2019 – Canadian Dollar rangebound
USD/CAD Open: 1.3159-1.3160, Overnight Range: 1.3102-1.3175
Oil is at $60.92 and gold is at $1,480.00. US markets are higher today.
The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3145. Support is at 1.3088.
The Canadian dollar is rangebound and will likely remain that way until mid-January. December is ending, and many major corporations, institutional accounts and hedge funds have closed their books for the year. The major risk events for the month have come and gone. European Central Bank (ECB) and Federal Open Market Committee (FOMC) monetary policy meetings finished without notable changes in policy. The UK election gave Prime Minister Boris Johnson a commanding majority and injected a new note of instability into Sterling.
The domestic economy is vulnerable, Alberta is still suffering from pipeline constraints, severely hampering its ability to get crude to markets. That means lower royalty payments to Ottawa and unless Federal government spending is curtailed, higher deficit. Crude isn’t the only commodity at risk. The Phase 1 US/China trade agreement says China must significantly increase its purchases of US agricultural products, with amounts of $40-$50 billion tossed around. The increased US market share must come at the expense of another country, and Canada is on China’s “naughty” list.
FX markets were tranquil overnight. The Australian and New Zealand dollars traded sideways in narrow ranges as the euphoria of the China and US trade agreement faded. AUDUSD traders are mildly bearish after the release of the Reserve Bank OF Australia minutes raised the risk of renewed monetary easing. A weaker than expected employment report on Thursday will exacerbate those fears.
USDJPY traded quietly ahead of the Bank of Japan monetary policy meeting results, due tomorrow. The BoJ is expected to leave policy unchanged but increase its dovish bias.
EURUSD shrugged off better than expected German IFO data and unchanged Eurozone CPI data and traded with a negative bias. EURUSD dropped from 1.1153 to 1.1121 in early Toronto trading.
GBPUSD is trading in Toronto at 1.3084, just above its overnight low, as the prospect of another year of “brinkmanship” Brexit negotiations loom.
Canadian dollar traders are looking ahead to this morning’s Canadian inflation data. Headline CPI is expected to rise to 2.2% y/y, in November, compared to 1.9% in October. The US data calendar is empty.
Today’s Suggested Range USD/CAD: 1.3110 – 1.3210