Canadian Dollar Update, December 22, 2020 – Canadian Dollar Bolstered by Oil
USD/CAD Open: 1.2866-70, Overnight Range: 1.2843-1.2933
WTI Oil is at $46.92 and gold is at $1,864.60. US markets are mixed today.
For today, USD resistance is at 1.2938. Support is at 1.2882.
• US COVID-19 Relief and spending bills passed
• GBPUSD chopped about on Brexit and coronavirus
• US dollar claws back some of yesterday’s losses
The Canadian dollar market was a sea of calm compared to yesterday’s wild swings. USDCAD touched 1.2952 early yesterday morning and then dropped to 1.2820 in the mid-afternoon, before closing the session at 1.2860. The FX frenzy was fueled by external events, namely Brexit, the discovery of a new strain of COVID-19, and US budget and COVID-19 Relief bill developments. Some traders are concerned that Canadian dollar gains may meet headwinds from an oil price drop. OPEC is increasing production in January even as fears that the second-wave pandemic will reduce demand in Q1 2021.
FX liquidity is rapidly evaporating as traders close their books on 2020, leaving the major currency pairs vulnerable to random price swings.
The US dollar is modestly firmer at the Toronto open.
GBPUSD has been exceptionally volatile today, trading erratically between 1.3363 and 1.3468. Prices react violently to Brexit headlines and rumours, while the latest UK coronavirus developments add another layer of uncertainty.
France continues to keep its borders closed to UK travelers and freight.
Over 1,500 trucks are waiting to cross into France. GBPUSD got a bit of a lift after a “source” told the UK Guardian that France was expected to announce a limited opening today. Traders are also leery about another UK national lockdown due to rising coronavirus cases.
There were reports that Britain made concessions on fishing quotas. Britain reduced its demand for the EU to reduce the value of their fishing catch by 60% to 35%.
The EU maintains it will not move beyond 25%. Also, Britain changed its demand for a three-year phase-in period to five-years.
And the talks go on.
EURUSD continues to consolidate last week’s gains following the break of resistance at 1.2160, which is now acting as support. The single currency traded in a 1.2205-1.2249 range overnight and is trading near the top of that band in Toronto. Prices are supported by improved risk sentiment following the US COVID-19 Relief deal, and by the news that EU citizens will start receiving a coronavirus vaccine after Christmas.
US Q3 GDP is expected to have risen 33.1% q/q, but the news will not be a factor to traders. Instead, the focus will continue to be on Brexit and Wall Street.
Today’s Suggested Range USD/CAD: 1.2820 – 1.2920