Canadian Dollar Update January 28, 2020 – Canadian Dollar dropping steadily
USD/CAD Open: 1.3193-1.3194, Overnight Range: 1.3179-1.3205
Oil is at $53.05 and gold is at $1,575.10. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3224. Support is at 1.3148.
The Canadian dollar inched lower overnight, continuing the trend that began following the Bank of Canada monetary policy meeting of January 22. That meeting is not entirely to blame for the Canadian dollar weakness, although it bears the bulk of the responsibility. The BoC monetary policy statement of December warned that the major risk to their outlook was rising trade tensions. Those tensions disappeared when the US and China signed the Phase 1 trade agreement on January 15. BoC Governor Poloz caught markets offside when he issued a dovish policy statement.
Then things went pear-shaped. The Wuhan coronavirus outbreak spooked traders world-wide and led to widespread demand for safe-haven currencies while crushing oil prices. The Canadian dollar accelerated lower and continued to inch lower overnight. USDCAD closed at 1.3189 and touched 1.3203 in early Toronto trading today.
Chinese markets remained closed for Lunar New Year holidays which continued to hurt FX liquidity in Asia. Asia equity indices followed the lead of Wall Street and dropped, closing with losses. That trend wasn’t observed in Europe, where European bourses are trading mixed to flat.
The British pound underperformed its major G-10 peers. GBPUSD is under pressure ahead of Thursday’s Bank of England policy meeting. Traders are undecided about a rate cut, suggesting volatility will be high when the statement is released. A rate cut may lead to a GBPUSD plunge to 1.2830. If rates are left unchanged, GBPUSD may rally to 1.3150. Weaker than expected UK Distributive Trades survey data also weighed on prices today.
EURUSD was stagnant in Asia, but punched through its overnight low in early Toronto trading to touch 1.1003. The European Central Bank’s dovish outlook is weighing on prices, as are bearish technicals that are looking for a test of support at 1.0960.
The Japanese yen and Swiss franc are supported by safe-haven demand. Yen gains are getting an added boost from soft US Treasury yields. The Loonie is undermined by selling of CADCHF and CADJPY.
The Australian and New Zealand dollars, like the Canadian dollar, are victims of the coronavirus scare. AUDUSD has plunged from 0.7020 at the beginning of the month to 0.6738 overnight. The Australian dollar plunge is exacerbated by fears that the Reserve Bank of Australia may cut interest rates again. Traders are also concerned that the coronavirus will stifle China’s economic growth and lead to lower demand for Australia exports.
The Canadian dollar will continue to track broad US dollar moves. The greenback could add to its gains this morning if today's US Durable Goods Orders data is higher than forecast.
Today’s Suggested Range USD/CAD: 1.3140 – 1.3240
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