Canadian Dollar Update, February 5, 2021 – Canadian Dollar getting support from crude
USD/CAD Open: 1.2795-99, Overnight Range: 1.2788-1.2831, Previous Close: 1.2824
WTI Oil is at $56.81 and gold is at $1,807.83. US markets are higher today.
For today, USD resistance is at 1.2811. Support is at 1.2742.
• WTI oil climbs to $57.06/b, last seen January 2020
• Record high US stocks stoke global equity rally
• US and Canadian employment reports ahead
The Canadian dollar traded firmer, due to a mix of broad US dollar weakness, rising crude prices, and bearish technicals. Traders were also trimming bearish Canadian doll positions ahead of today’s release of the US and Canadian employment reports.
Canada is expected to lose jobs for the second month in a row. The latest round of lockdown measures in some regions of the country suggest employment fell 47,500 in January compared to 62,600 job losses in December. Despite that, Canadian dollar sentiment is modestly positive.
The USDCAD downtrend from March 2020 is alive and well below while prices are below1.2890. Traders are looking for another test of support in the 1.2520 area, last seen in April 2018. The bearish USDCAD sentiment stems from prices rejecting a break above the downtrend line at the end of January. Yesterday’s topside break-out attempt didn’t even clear 1.2842. A decisive break of support at 1.2760 suggests another short-term top is in place, and a retest of 1.2520 is likely.
Global equity traders followed Wall Street’s lead and bought stocks. Equities are getting a huge amount of traction from chatter around Biden’s stimulus plan. A watered-down version (from proposed $1.9 trillion to $1.3 trillion) is expected to get approved. The NASDAQ has gained 20%, S&P 500 15%, and DJIA 13%, since Biden’s election, in anticipation of a vaccine-fueled economic boom, in a low-interest rate environment.
Today’s US employment report may inject an element of two-way risk into that view. The US Nonfarm payrolls (NFP) forecasts range from a loss of 20,000 to a gain of 200,000 jobs. The consensus is an increase of 50,000. Regardless, equity traders are likely to view any result as positive. FX traders, not so much. The US dollar retreated overnight.
EURUSD traded with a bit of a bid overnight, rising from 1.1953 to 1.1987. The price action was contained as bearish technicals below the 1.2020 area limited gains from pre-NFP position adjustment demand. The EU’s mismanagement of COVID-19 vaccines, existing lockdown measures, Italian political uncertainty, and the perception of US economic outperformance, weighed on the currency.
GBPUSD is consolidating gains after the Bank of England appeared to have pushed negative interest rates to the backburner. Prices bounced in a 1.3667-1.3711 range.
AUDUSD traded in a 0.7585-0.7625 band. Upbeat comments from RBA Governor Phillip Lowe, and broad US selling pressures, lifted prices off the low. NZDUSD tracked AUDUSD moves but underperformed.
US dollar direction will be determined by the NFP data, equity market action, and US stimulus news.
Today’s Suggested Range USD/CAD: 1.2750 – 1.2850