Canadian Dollar Update, February 23, 2021 – Canadian Dollar grinding out gains
USD/CAD Open: 1.2617-21, Overnight Range: 1.2587-1.2623, Previous Close: 1.2618
WTI Oil is at $62.36 and gold is at $1,806.02. US markets are mixed today.
For today, USD resistance is at 1.2611. Support is at 1.2563.
-Fed Chair Powell testimony today
-EU inflation as expected and ignored by EURUSD
-US dollar opens with small gains except against GBP
The Canadian dollar traded sideways overnight, albeit with a modestly bullish bias. The currency is getting a bit of support from surging commodity prices, including oil.
West Texas Intermediate oil jumped 5% since yesterday morning, rising from $59.97 to $62.97. Prices have since slipped to $62.15, but the outlook is positive, according to analysts at Goldman Sachs. They are forecasting another $10.00/b increase due to lower expected inventories and higher marginal costs associated with restarting production.
Surging commodity prices have fueled AUDUSD and NZD gains. AUDUSD is trading at levels last seen in February 2018 driven by iron-ore price gains, expectations for a global economic rebound and a more benign central bank.
NZDUSD has tracked AUDUSD higher, supported by many analysts suggesting that the RBNZ may raise interest rates sooner than anticipated. The RBNZ meeting is tomorrow and they are unlikely to change monetary policy. However, they may express unhappiness at the currency level, which has risen 33% since March 2020.
Fed chair Jerome Powell’s testimony to Congress starts at 10:00 am. He is expected to push back against the reflation trade while tempering enthusiasm for equities. Markets will be volatile especially during the Q&A.
Bank of Canada Governor Tiff Macklem’s speech may be overshadowed by the Fed. The theme is the Labour Market impact from COVID.
US Treasury Secretary Janet Yellen repeated her concerns about Bitcoin, describing it as a “highly speculative, inefficient digital currency, often used in illegal transactions.” It wasn’t anything she hadn’t said before. Her remarks, and a delayed reaction to Elon Musk’s weekend observation that Bitcoin prices seemed high, helped drive BTCUSD down from $58,332.36 to $45,047.78 between yesterday and today. Prices are just above the low in NY.
GBPUSD was the best performing currency pair overnight. Prices bottomed out at 1.3980 yesterday and peaked at 1.4096 overnight in a rally fueled by Prime Minister Boris Johnson’s reopening plans from the coronavirus lockdown. Price gains were exacerbated by broad US dollar weakness. Traders ignored the UK employment report which was better than expected. Analysts believe the UK employment picture will deteriorate sharply when the government furlough program ends.
EURUSD churned in a 1.2136-1.2179 range. Prospects for a global economic rebound and broad US dollar selling pressures are underpinning prices while raising Treasury yields, and fear of reflation are capping gains.
Today’s data includes Cas-Shiller Home Price Index and Consumer Confidence.
Today’s Suggested Range USD/CAD: 1.2570 – 1.2670