Canadian Dollar Update February 26, 2020 – Canadian Dollar suffering form pandemic worries
USD/CAD Open: 1.3278-1.3279, Overnight Range: 1.3271-1.3307
Oil is at $50.08 and gold is at $1,638.00. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3327. Support is at 1.3236.
All it took was for the US Centers for Disease Control and Prevention to issue a press release, warning that the coronavirus could cause a pandemic, to spark panic on Wall Street yesterday. That set the tone for equity and FX markets overnight and kept the Canadian dollar on the defensive as a result.
The Dow Jones Industrial Average (DJIA) plunged 3.15%, S&P 500 lost 3.03%, and the NASDAQ gave up 2.77% by the time US stock markets closed yesterday. The plunge spooked traders in Asia, and even though the major equity indexes closed with losses, they were far less dramatic than the American experience. European bourses sank at their open, but prices are well off their lows. US equity futures are suggesting gains to start the day.
The South China Morning Post said there were 81,184 confirmed coronavirus cases world-wide, with South Korea, the Diamond Princess cruise ship, and Italy with the most cases, outside of China.
Markets are pricing in two Fed rate cuts in 2020, which is a marked change from January when no cuts were expected. Traders expect the Fed to react to counter the risk of an economic downturn because of COVID-19. However, yesterday, the Fed Vice Chair threw cold water on that notion when he said, “it is still too soon to even speculate about either the size or the persistence of these effects, or whether they will lead to a material change in the outlook”.
EURUSD spiked to 1.0908 in Europe and just as quickly dropped to 1.0864 in early Toronto trading. Fears that the virus will spread fueled speculation that the European Central Bank would be forced to cut rates. Traders are pricing in a 0.10 bp cut by the end of the year.
There are no actionable economic reports from Canada or the US today, leaving FX traders at the mercy of Wall Street and Coronavirus headlines.
Today’s Suggested Range USD/CAD: 1.3230 – 1.3330