Canadian Dollar Update February 13, 2020 – Canadian Dollar rally stalling
USD/CAD Open: 1.3249-1.3250, Overnight Range: 1.3240-1.3271
Oil is at $51.40 and gold is at $1,579.80. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3273. Support is at 1.3222.
The Canadian dollar drifted higher steadily this week, but the rally seems to have stalled overnight.
USDCAD was unable to extend losses below support in the 1.3240 area and inched higher overnight. Bank of Canada Governor Stephen Poloz was in sunny Melbourne, Australia, attending a meeting of the Australia Canada Leadership forum. His remarks were not published on the BoC website, but he reportedly said that the Canadian economy “was in a good place.” He told the audience that the BoC must balance the risks of cutting interest rates in the event of a slowdown against increasing financial vulnerability risks. FX traders ignored the comments, preferring to focus on broad US dollar sentiment.
Overnight, that sentiment was in risk-aversion mode. China announced a massive jump in the number of coronavirus cases and deaths, and traders got spooked. They bought the traditional safe-haven currencies.
EURUSD suffered the most from the coronavirus headlines. The news exacerbated concerns of a Eurozone recession. Eurozone industrial production data was weaker than expected yesterday. The results may worsen as problems disrupt the supply of auto parts. EURUSD is trading around its overnight low of 1.0862 in Toronto and has a negative outlook.
GBPUSD traders ignored Covid-19 fears and bought the currency pair after RICS Housing Price Balance Survey data exceeded expectations, rising 17%. (forecast 3.0%).
The rally squeezed short GBPUSD positions with the break above resistance at 1.2990, in part because the Eurozone recession problems may improve the UK trade negotiation position.
Oil price movements were erratic. Oil traders are optimistic, and content to dismiss OPEC and International Energy Agency forecasts for a decline in crude oil demand in 2020. They believe Russia will come to terms with OPEC and agree to another round of oil production cuts, giving prices another boost. That news also underpinned the Canadian dollar.
USDJPY dropped on the back of safe-haven demand for yen and a dip in US Treasury yields. AUDUSD and NZDUSD were weighed down by risk aversion sentiment, as well.
US CPI data and the weekly jobless claims report is on tap today. January CPI is expected to rise to 2.4% y/y from 2.3% in December.
Today’s Suggested Range USD/CAD: 1.3200 – 1.3300
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