Canadian Dollar Update January 30, 2020 – Canadian Dollar undermined by risk-aversion
USD/CAD Open: 1.3199-1.3200, Overnight Range: 1.3187-1.3226
Oil is at $51.89 and gold is at $1,582.30. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3241. Support is at 1.3193.
The Canadian dollar continued to sink overnight, weighed down by ongoing risk-aversion sentiment. The World Health Organization is holding another meeting today to discuss if this coronavirus outbreak warrants classification as a Global Health Emergency.
The coronavirus outbreak reverted to be the leading market focus after Wednesday’s Federal Open Market Committee meeting delivered as expected. The FOMC left interest rates and policy unchanged, which was universally expected. Policymakers tweaked the statement wording just enough to suggest the Fed was slightly dovish. The US dollar drifted lower on the news but not against the Canadian dollar. The Loonie traded lower on the back of sharply lower oil prices.
West Texas Intermediate (WTI), the North American benchmark, fell from $53.32/barrel to a low of $51.90/barrel overnight. Prices were already under pressure after the Energy Information Administration said US crude inventories rose 3.5 million barrels in the week ending January 24. A benign Fed and rising coronavirus fears fueled the sell-off.
Increased risk aversion sentiment led to fresh demand for Swiss francs and Japanese yen. USDJPY dropped from 109.05 to 108.81 and falling US Treasury yields added to its woes.
The Australian and New Zealand dollars didn’t get any benefit from better than expected trade data. Both currency pairs were sold because China is their largest trading partner and concerns about a negative impact on China growth is impacting prices.
EURUSD benefitted from the FOMC statement and managed to increase its gains overnight. Prices are almost back to Monday’s opening levels although the gains are relatively shallow. The short term technicals are bearish below 1.1040.
The Bank of England took center stage in early Toronto trading and surprised about half of the traders when they left interest rates unchanged. GBPUSD jumped to 1.3095 from 1.2974 overnight, as short GBPUSD trades got squeezed. Two dissenters voted for immediate rate cuts. The BoE also cut its growth forecast for 2020, predicting GDP growth of 0.8% rather than the previous forecast of 1.2%.
US Q4 GDP is due. Other US data includes Personal Consumption/Expenditures and weekly Jobless Claims. Bank of Canada Deputy Governor Paul Beaudry will talk about “Monetary policy and financial vulnerabilities” this afternoon.
Today’s Suggested Range USD/CAD: 1.3150 – 1.3250
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