Canadian Dollar Update February 10, 2020 – Canadian Dollar directionless with negative bias
USD/CAD Open: 1.3300-1.3301, Overnight Range: 1.3288-1.3329
Oil is at $49.91 and gold is at $1,577.90. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3340. Support is at 1.3305.
The Canadian dollar inched higher overnight, alongside commodity bloc currency gains. Those gains may have more to do with profit-taking than a change in sentiment. If anything, sentiment has gotten worse. The UK government declared the coronavirus a “serious and imminent threat to public health.”
The US dollar finished the week on solid ground, led by 2.42% gain against the British pound, compared to the January 31, New York closing levels. The Canadian dollar sank 0.53% during that period. Those gains were entrenched on Friday after a better-than-expected US nonfarm payrolls report. The US gained 225,000 new jobs which fueled demand for the greenback. The gains were tempered by mildly disappointing average hourly earnings data (actual 0.2%), and an uptick in the unemployment rate to 3.6% from 3.5%.
Wall Street used the dip in average hourly earnings and uptick in the unemployment rate as an excuse to book profits with ongoing coronavirus concerns motivating some sellers. Asia and European equity indexes traded lower overnight while US equity futures are pointing to a mixed to flat opening on Wall Street.
China inflation data was higher than expected. CPI rose 5.4% y/y in January compared to forecast for a 4.9% rise. Producer Prices were unchanged. The news helped to underpin the antipodean currencies. AUDUSD climbed to 0.6706 from 0.6660, and NZDUSD rose to 0.6416 from 0.6396. The Canadian dollar got into the act and inched higher as well.
USDCAD dropped from 1.3311 to 1.3290.
USDJPY traded in a 109.57-109.86. range. Prices were supported by steady to higher US Treasury yields and softer US dollar profile.
EURUSD traded narrowly in a 1.0944-1.0956 band. European Central Bank Vice President Luis de Guindos reminded traders of the ECB’s dovish bias when he warned: “we have the tools and willingness to use them, if necessary.” Traders ignored the comments as he just repeated earlier statements. The contrast between the Eurozone and US economy will be on display Tuesday.
That’s when Fed Chair Jerome Powell’s semi-annual address to Congress begins. The report has been released and paints a picture of a US economy that is growing moderately with a strong labour market supportive financial conditions, and steady, but below-target inflation.
GBPUSD ignored the government’s coronavirus warnings and bought the currency pair. Prices climbed steadily from 1.2873 to 1.2935, due to a minor profit taking rally.
The Bank of Canada’s surprising shift to a dovish monetary policy outlook is limiting Canadian dollar gains despite Friday’s better than expected Canadian jobs data. The Canadian dollar will remain on the defensive due to weak oil prices and the undercurrent of risk-aversion sentiment.
Canadian housing starts and building permits data is available today, but it won’t be a concern for Canadian dollar traders.
Today’s Suggested Range USD/CAD: 1.3250 – 1.3350
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