Canadian Dollar Update February 27, 2020 – Canadian Dollar at tipping point
USD/CAD Open: 1.3331-1.3332, Overnight Range: 1.3316-1.3374
Oil is at $46.15 and gold is at $1,657.90. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3398. Support is at 1.3328.
The Canadian dollar is at a tipping point. The currency did not participate in the broad US dollar sell-off overnight. Instead, it was sold due to the ongoing slide in crude oil prices, elevated expectations that the Bank of Canada will cut interest rates next week, and heightened fears that the railway blockades will negatively impact the domestic economy.
Tech Resources pulled their application for a massive new oilsands mine in Alberta. They complained that the lack of clarity around the Federal government’s climate-change policies made it extremely difficult to quantify the economics of the project.
The Bank of Canada surprised markets on January 22nd when they flipped to a dovish monetary policy outlook. They could surprise markets again, next week if they cut the overnight rate. Speculation of such a move exacerbated Canadian dollar selling yesterday and overnight.
Wall Street closed around “flat” yesterday. The Dow Jones Industrial Average and S&P 500 indexes were down less than ½ of a percent, while the Nasdaq squeaked higher. That wasn’t the case overnight. Asia equity markets dropped severely, led by a 2.13% plunge in Japan’s Nikkei 225 index. The major European indexes didn’t fare any better. The German DAX index is currently down 2.35% while the UK FTSE 100 has fallen 2.10%. US equity futures point to a drop when Wall Street opens. Fears that the coronavirus outbreak will become a pandemic fueled the selling. Falling equity markets will be another negative for the Canadian dollar.
EURUSD rallied yesterday and continued to do so overnight, climbing from 1.0880 in Asia to 1.0962 in Toronto, today. Wall Street’s reaction to pandemic fears led to rising expectations that the Federal Reserve will cut interest rates in March, which led to broad US dollar selling.
GBPUSD is the worst performing G-10 major currency overnight, dropping from 1.2945 to 1.2862 before rebounding to 1.02900 in Toronto. UK officials said their negotiating mandate with the EU would not include abiding by EU rules and regulations, which sparked the sell-off.
There are a lot of US economic reports today, including Durable Goods Orders, which may distract traders from coronavirus concerns.
Today’s Suggested Range USD/CAD: 1.3280 – 1.3380
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