Canadian Dollar Update, December 21, 2020 – Canadian Dollar Dives
USD/CAD Open: 1.2925-29, Overnight Range: 1.2784-1.2957
WTI Oil is at $47.48 and gold is at $1,882.50. US markets are mixed today.
For today, USD resistance is at 1.2858. Support is at 1.2803.
• Mutating COVID-19 strain spooks traders
• Congress “ok’s” COVID-19 Relief bill
• Another Brexit deadline bites the dust
The Canadian dollar tanked along with the rest of the major G-10 currencies, overnight. The British pound was the biggest losers, giving up 2.5% on a combination of Brexit and coronavirus woes.
The weekend Brexit deadline is just a memory. Nothing changed. The sides are at an impasse over EU access to UK waters for fishing. It is almost laughable when you consider that fishing is less than ½ of one percent of GDP in the UK and not even a rounding error for EU GDP. Brexit deadlines are like election promises-they are meaningless. The next deadline is Christmas Day.
Traders were also spooked by news of a mutant strain of the coronavirus in the UK, resulting in the government implementing new draconian restrictions. The EU responded by closing borders and airports to UK travelers and freight. GBPUSD plunged, falling to 1.3190 from 1.3530.
They have since recovered to 1.3290 in Toronto trading.
EURUSD suffered from the failure to achieve a Brexit agreement and on risk-aversion demand for US dollars. US politicians agreed to a new COVID-19 Relief bill on the weekend. Most of the details were known, and the news was expected, leading to a text-book example of “buy the rumour-sell the fact”. The greenback had been widely sold on anticipation that the Republicans and Democrats would reach an agreement. When they did, it resulted in a wave of profit-taking.
Bear in mind, that holiday-thinned and year-end markets exacerbated the magnitude of the FX moves.
USDJPY traded firmer in a 103.26-103.88 range. Risk-off demand for yen and choppy prices swings in US Treasury yields drove price action.
AUDUSD and NZDUSD lost 1.78% and 1.76% respectively. They suffered from a wave of US dollar demand which drove prices lower and triggered some stop-loss selling.
The Canadian dollar dropped 1.10% against the US dollar, tracking the commodity currency bloc lower. USDCAD rallied from a low of 1.2788 in Asia to 1.2956 in Europe, just before Toronto opened. Prices have subsequently dropped to 1.2880. USDCAD gains were underpinned by a drop in West Texas Intermediate (WTI) oil prices, which fell from $49.08/barrel to $46.11/b, a drop of 6.0%. Also, the second-wave coronavirus pandemic is resulting in new stricter lockdown measures being imposed across the country.
FX markets will remain choppy, and headline-driven.
Today’s Suggested Range USD/CAD: 1.2800 – 1.2900