Canadian Dollar Update February 18, 2020 – Canadian Dollar gets bitten by Apple
USD/CAD Open: 1.3234-1.3235, Overnight Range: 1.3229-1.3278
Oil is at $51.46 and gold is at $1,605.80. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3285. Support is at 1.3228.
The Canadian dollar got bitten by Apple. The trillion-dollar tech-behemoth downgraded their earnings outlook for Q1 2020 and that sent global financial markets into a tizzy. Apple said the coronavirus constrained production of iPhones, causing supply shortages which would temporarily affect revenues worldwide. Equity traders quickly realized that if the coronavirus were negatively impacting Apple’s bottom line, other companies with a China-based supply chain would suffer the same fate. Asia equity indices dropped, led by a 1.54% plunge in the Hong Kong Hang Seng Index. European indexes followed suit, and Wall Street is poised to open in negative territory.
The Canadian dollar inched lower, on the shift into negative risk sentiment. The losses were exacerbated by a steep drop in West Texas Intermediate oil prices which dropped from $52.25/barrel on Monday to $50.93 in early Toronto trading. Oil sentiment remains bearish due to the steep drop of demand for crude by China, and Russia’s failure to agree with OPEC’s new proposed production cuts.
The Canadian dollar may also be suffering from the perception that the closure of major Canadian railway lines will be a drag on domestic growth. A group of Indigenous people are opposed to the Coastal GasLink project in BC. Indigenous tribes across Canada have blocked railway lines in support of the opposition.
The Canadian dollar has also been sideswiped from broad US dollar demand. The greenback was in demand against the euro after the German ZEW Survey showed German investor confidence was pummeled by coronavirus fears. Investor Sentiment tumbled to 8.7 compared to 27.7 in January. The Current Conditions Survey widened to -15.7 from -9.5 and EURUSD dropped to 1.0813 from 1.0837.
The results are further evidence of the outperformance of the American economy to that of the Eurozone.
The British pound bounced from its overnight low of 1.2972 to 1.3047 following better than expected UK employment data. British employment reached a new high, but the results were tarnished somewhat by the drop in average hourly earnings. Nevertheless, the currency pair is close to its overnight peak in Toronto trading.
USDJPY slipped on the back of fresh demand for safe-haven currencies and a drop in US Treasury yields.
The 10-year yield was 1.59% on Friday and 1.54% today.
Canada December Manufacturing shipments data is expected to rise 0.5% compared to the 0.6% decline in November. A worse than expected result combined with today’s rail blockades would undermine the Canadian dollar.
Today’s Suggested Range USD/CAD: 1.3180 – 1.3280