Canadian Dollar Update January 24, 2020 – Canadian Dollar awaiting Retail Sales report
USD/CAD Open: 1.3127-1.3128, Overnight Range: 1.3117-1.3142
Oil is at $54.67 and gold is at $1,564.90. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3166. Support is at 1.3106.
The Canadian dollar continued to consolidate Wednesday’s losses after the Bank of Canada appeared to change its monetary policy outlook. Traders are looking for this morning’s release of Retail Sales data to provide further clues about the domestic economy. Analysts expect that the details will show a 0.4% m/m rise, which would be a vast improvement over the 0.5% decline seen in October. If so, it may spark some Canadian dollar demand.
FX markets were lively overnight. New Zealand reported a higher inflation reading which gave NZDUSD a lift. New Zealand CPI rose 1.9% q/q in Q4, handily beating the previous result of 1.5%. NZDUSD rallied from yesterday’s low of 0.6528 to 0.6627 and outperformed its Antipodean cousin. AUDUSD rose from 0.6836 to 0.6856 even though Australia’s Manufacturing, Services, and composite PMI reports were mixed.
FX volumes were lower than usual due to the start of the Chinese New Year holidays. This year’s festivities will be impacted by the Wuhan coronavirus, which has led to travel bans for around 25 million people. To give it some perspective, the number of people affected by the travel restrictions represents just under 70% of the population of Canada.
USDJPY price action was contained in a 109.45-109.64 range. Prices were supported by broad US dollar demand. However, falling US Treasury yields, residual safe-haven demand for yen, and bearish technicals looking for further losses to 108.50, capped gains.
EURUSD added to yesterday’s post-European Central Bank policy meeting losses. The single currency saw a brief spurt of demand in early European trading when German, and Eurozone PMI reports were slightly better than forecast. The gains were short-lived as both reports pointed to a Eurozone economy that was still shrinking. EURUSD traders were not impressed by the ECB meeting which left policy unchanged. The deposit rate remains a negative 0.50%, and they will continue with monthly asset purchases. Analysts do not expect any change until 2021. EURUSD dropped from 1.1107 yesterday to 1.1029 in early Toronto trading.
GBPUSD is choppy. Prices bounced erratically in a 1.3081-1.3171. range. The topside was tested when UK Markit Manufacturing PMI jumped to 49.8 from 47.5, and Service PMI rose to 52.9 from 50.0. The rally quickly reversed under the weight of bearish technicals, the looming official Brexit, and UK coronavirus fears. GBPUSD is trading at the bottom of its overnight range in Toronto.
The Canadian dollar is also underperforming due to the steep drop in oil prices since the coronavirus became an issue. West Texas Intermediate has lost 5.8% since Monday’s Toronto open.
Today’s US economic reports are second-tier and not likely to be a factor for FX markets. Instead, the US may be vulnerable to profit-taking selling ahead of the weekend.
Today’s Suggested Range USD/CAD: 1.3080 – 1.3180
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