Canadian Dollar Update, January 29, 2021 – Canadian Dollar Sinks then Soars
USD/CAD Open: 1.2828-32, Overnight Range: 1.2821-1.2873, Previous Close: 1.2831
WTI Oil is at $52.57 and gold is at $1,857.98. US markets are lower today.
For today, USD resistance is at 1.2836. Support is at 1.2700.
• Global equity indexes sink-US futures negative but off their worst levels
• Month-end portfolio rebalancing flows undermining US dollar
• Canada November GDP expected to rise 0.4% m/m
The Canadian dollar had a wild overnight session. USDCAD closed at 1.2831 yesterday, then climbed steadily to test resistance at 1.2880, which held. Prices slid to 1.2830 just before Toronto traders got started then accelerated lower, halting at 1.2782.
Analysts are forecasting a 0.4% m/m increase in GDP for November.
However, the result may be worse than expected due to a sharp increase in COVID-19 containment measures during the month, which decimated the hospitality industry, again.
Nevertheless, FX traders are likely to ignore the news as the results are stale.
Asia equity indexes got hammered as traders ignored the positive close on Wall Street.
The Nikkei 225 index fell 1.89% while the Australian ASX 200 lost 0.69%.
European bourses sank but are slowly recouping some losses, and Wall Street appears poised to open in the red.
It wasn’t all bad news for equity traders. Shares in the GameStop continued their wild ride. Prices dropped yesterday and closed with a 44.3% loss. News that equity trading platform Robinhood removed trading restrictions after it managed to secure $1.0 billion in emergency funding. Prices jumped 95.0% in after-hours trading.
The British pound has had a wild twenty-four hours, trading erratically in a 1.3640-1.3740 range. The currency continues to be supported by foreign investment demand, following the Brexit deal, and because of month-end portfolio rebalancing flows which have fueled GBPUSD demand. Gains are capped by concerns that the ongoing coronavirus crisis, and EU/UK tensions over vaccine shipments will weigh on economic growth.
EURUSD dropped to 1.2096 overnight but quickly rebounded, rising to 1.2148 in NY. Traders ignored remarks from ECB Board member and Irish Central Bank Governor Makhlouf, saying that further ECB rate cuts are not warranted, at the moment. Prices got a bit of a lift after German unemployment and Q4 GDP improved slightly.
US Chicago Purchasing Managers Index, Michigan Consumer Sentiment, and Pending Home Sales reports are due. The FX impact should be minimal as equity market developments, and month-end flows will dictate direction.
Today’s Suggested Range USD/CAD: 1.2740 – 1.2840