Canadian Dollar Update, January 25, 2021 – Canadian Dollar Looking for Direction
USD/CAD Open: 1.2699-2703, Overnight Range: 1.2690-1.2734, Previous Close: 1.2733
WTI Oil is at $52.79 and gold is at $1,862.87. US markets are lower today.
For today, USD resistance is at 1.2782. Support is at 1.2704.
• Virtual World Economic Forum in Davos starts today
• German IFO index data weighs on EURUSD
• Global risk sentiment is mildly positive
The Canadian dollar inched higher overnight, supported by broad, but mild risk sentiment. Rising numbers of COVID-19 cases, exacerbated by aggressive mutations of the virus, and vaccine supply issues, are offset, to a degree, as traders look forward to a post-pandemic, global economic boom.
Meanwhile, the euphoria around Joe Biden’s inauguration and his $1.9 trillion COVID Relief bill is fading. The Washington Post reports that Democrats and Republicans are questioning the need for some of the spending. Markets are also concerned about increased animosity if the Democrats go ahead with their plan to impeach Trump and send articles of impeachment, to the Senate today.
The Canadian dollar continues to be supported by last week’s Bank of Canada policy statement, which introduced the possibility of tapering quantitative easing purchases if the economy improves. That is not a surprise. However, the headline reiterated the “Bank of Canada will hold current level of policy rate until inflation objective is achieved, continues quantitative easing.”
The Canadian dollar received some additional support with the rise in crude oil prices. West Texas Intermediate (WTI) climbed to $52.86/barrel from Friday’s close of $51.99/b. Those gains were mostly due to broad US dollar weakness and hopes for increased demand from China due its post-pandemic recovery.
Asia equity indexes closed higher, with Hong Kong’s Hang Seng Index surging 2.41%. European stock traders didn’t follow suit. The German DAX is down 1.25%, in part due to concerns around COVID-19 virus mutations. French President Macron is expected to announce a third national lockdown on Wednesday. EURUSD is trading sideways in a 1.2141-1.2183 range.
Ongoing Italian political concerns and modestly bearish technicals are weighing on prices. Prices are also drifting lower ahead of Wednesday’s FOMC meeting.
GBPUSD is inching higher despite the impact of COVID-19 restrictions on the economy, and the risk that the UK tightens measures further. Those concerns are alleviated due to the UK’s efficient vaccination program with over 9.5% of the population receiving at least one dose. GBPUSD technicals remain positive above 1.3460.
NZDUSD is trading near the top of its overnight range, with prices continuing to be supported by expectations that the RBNZ will be less dovish in 2021.
The World Economic Forum starts today in Davos, Switzerland, with speeches from China’s XI Jinping, Emmanuel Macron, and Angela Merkel.
Today’s Suggested Range USD/CAD: 1.2680 – 1.2780