Canadian Dollar Update December 30, 2019 – Canadian Dollar’s Christmas rally
USD/CAD Open: 1.3068-1.3069, Overnight Range: 1.3054-1.3084
Oil is at $61.47 and gold is at $1,518.90. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3093. Support is at 1.3023.
Santa was good to the Canadian dollar. The local currency sank following a weaker than forecast October GDP report, but those losses were not sustained beyond Boxing Day.
The weak GDP data was not a total surprise to analysts. Bank of Montreal economists noted that many of the major indicators including employment, retail sales, wholesale sales and housing starts were down during the month. Statistics Canada pointed out that the result was the first decline in eight months and that on a three-month rolling basis, GDP was up 0.2%.
Boxing Day was not a holiday in the US. Trading desks were lightly staffed, and those staffers sold US dollars across the board. There wasn’t a specific catalyst for the selling pressure, although month-end and year-end portfolio rebalancing flows likely played a role. US equity gains in December have been stellar, which suggests portfolio managers will need to sell US dollars for portfolio rebalancing requirements. USDCAD dropped from a Christmas Eve closing level of 1.3165 to 1.3068 at the Toronto open today.
The Canadian dollar received additional support from a surge in oil prices. West Texas Intermediate, (WTI) the North American benchmark crude price, jumped 3.3% since December 20, when it hit $60.10/barrel. Prices were supported by the American Petroleum Institute report that US crude inventories declined by 7.9 million barrels in the week ending December 20.
The Canadian dollar is also benefiting from broad US dollar weakness. The greenback has lost ground against all the G-10 major currencies, led by a 1.8% rise in the New Zealand dollar and a 1.4% increase in the Australian dollar. The NZDUSD rally continued to be underpinned by the US/China Phase 1 trade deal. China Ambassador to the US said “Since we have spent so much time with such great efforts at reaching this agreement, I think it would certainly serve the interests of both sides if this agreement is implemented.”
GBPUSD rallied from 1.2908, December 24 to 1.3128 in Toronto today due to a mixture of short-covering, Brexit optimism and broad US dollar weakness. EURUSD followed suit although its gains were more subdued. The single currency climbed from 1.1070 to 1.1208 before inching down to 1.1188 in Toronto today.
The US economic reports available today include Chicago Purchasing Managers Index and Pending Home Sales. The Canadian calendar is empty.
Today’s Suggested Range USD/CAD: 1.3020 – 1.3120
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