Canadian Dollar Update, February 18, 2021 – Canadian dollar rangebound
USD/CAD Open: 1.2692-96, Overnight Range: 1.2683-1.2715, Previous Close: 1.2700
WTI Oil is at $61.16 and gold is at $1,784.86. US markets are lower today.
For today, USD resistance is at 1.2767. Support is at 1.2671.
-Robust US data underpins global risk sentiment
-China returns from Lunar New Year holiday
-US dollar gives back some of yesterday’s gains
The Canadian dollar is rangebound, albeit with a modest firming bias.
USDCAD rallied to 1.2744 yesterday before running out of steam and reversing course. Surging crude oil prices helped to limit the gains.
West Texas Intermediate, the North American benchmark price, climbed to $62.23/barrel overnight after a massive US winter storm knocked as much as 40% of the daily crude production off-line. Oil price gains continue to be propelled by existing OPEC and Saudi Arabia production cuts and hope that a vaccine-fueled global economic rebound lifts oil demand.
The tug of war between the Fed and bond traders is ongoing. The FOMC minutes from the January 27 meeting, released yesterday, reiterated the Fed’s position that inflation increases would be temporary and that US employment is far weaker than the data suggests. That shouldn’t be a surprise to anyone listening to the numerous Fed policymakers since the meeting.
However, bond traders note that the Fed also expects the medium-term outlook had improved and that inflation risks were becoming more balanced.
US treasury yields remain elevated at 1.292% in NY trading, but they are below the overnight peak of 1.316%.
Concerns that rising inflation will force the Fed to increase interest rates sooner than expected underpin the US dollar. Simultaneously, the recent slate of robust US economic data is stoking hopes for a strong, global economic recovery, limiting US dollar gains.
China returned from week-long Lunar New Year holiday. The Shanghai Shenzhen CSI 300 index gapped higher at the open, but then fell steadily throughout the session to close with a small loss. The other major Asia equity indexes closed lower except for Australia’s ASX 200, which was flat. European equity indexes are modestly lower except for the German Dax, which is modestly higher. Wall Street appears poised to open in negative territory.
EURUSD is attempting to claw back losses since dropping from 1.2167 Tuesday to 1.2023 yesterday. Prices are probing resistance in the 1.2070 area. EURUSD gains are hampered by fears that the EU economic recovery will sharply lag that of other G-10 nations due to the EU’s mismanagement of COVID-19 vaccines.
Topside resistance is exacerbated by ECB policymakers expressing concern about the level of the currency. The ECB minutes of the January 21 policy meeting reiterated that economic growth risks were to the downside.
Today’s US data includes US weekly Jobless claims, Housing starts building permits and Philadelphia Fed Manufacturing Survey data.
Today’s Suggested Range USD/CAD: 1.2650 – 1.2750