Canadian Dollar Update, February 2, 2021 – Canadian Dollar Outperforms Commodity Currency Bloc
USD/CAD Open: 1.2807-11, Overnight Range: 1.2784-1.2857, Previous Close: 1.2859
WTI Oil is at $54.83 and gold is at $1,849.46. US markets are higher today.
For today, USD resistance is at 1.2844. Support is at 1.2787.
• Soaring crude prices underpin Canadian dollar
• Global equities rise on US stimulus talks
• US dollar opens on a mixed note
The Canadian dollar is the best performing G-10 currency at today’s NY open. That is not saying much since the Loonie only managed to gain 0.37%, despite WTI oil prices soaring 5.0% since yesterday morning.
Oil price gains are mainly due to reports that OPEC members are complying with the production cuts announced at the beginning of the year, helped along by Saudi Arabia’s extra 1 million barrel per day reduction. Prices are also supported by higher price forecasts from banks such as Goldman Sachs. UBS predicted oil inventories would continue to drop in the second half of the year.
The Canadian dollar managed to squeeze a modicum of support from the oil price gains, allowing it to outperform against the Australian and New Zealand dollars.
AUDUSD suffered from a surprisingly dovish Reserve Bank of Australia (RBA) monetary policy statement. The central bank announced an extension to the quantitative easing program, surprising analysts who expected it to be unchanged while setting the stage for a tapering announcement at the March meeting. The RBA also expressed displeasure at the currency level, saying “The exchange rate has appreciated and is in the upper end of the range of recent years.”
AUDUSD traders were not impressed and drove the currency from 0.7660 to 0.7590. AUDCAD fell to 0.9729 from 0.9822.
Global equity indexes accelerated higher due to news that US policymakers were making progress on Biden’s COVID-19 relief plan. The gains are somewhat perplexing as variations of the stimulus package have been talked about for months, and prices already reflected the news.
The positive risk bias evident in global equities is not quite so prominent in FX markets. EURUSD is sinking, after breaking support at 1.2050. Further losses below 1.2010 would target 1.1810. Prices are weighed down by Italian political issues, and the EU’s mismanagement of the coronavirus vaccine roll-out. Analysts fear that an expected Eurozone economic recovery will lag that of the US.
GBPUSD continues to chop around in a 1.3630-1.3770 range with price action since last Tuesday. The Bank of England policy meeting on Thursday may spark some excitement when officials are expected to announce their findings of the use of negative interest rates.
There are not any top-tier economic reports released today.
Today’s Suggested Range USD/CAD: 1.2760 – 1.2860