Canadian Dollar Update January 31, 2020 – Canadian Dollar crunched
USD/CAD Open: 1.3208-1.3209 Overnight Range: 1.3195-1.3244
Oil is at $51.53 and gold is at $1,591.50. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3248. Support is at 1.3199.
The Canadian dollar got crunched again, overnight. It closed at its best level for Thursday’s session, but things went pear-shaped in Asia. The Australian and New Zealand dollars reacted poorly to the World Health Organizations’ (WHO) declaration that the Wuhan coronavirus outbreak was a “Global Emergency.”
AUDUSD dropped to 0.6684 from 0.6728 while NZDUSD fell from 0.6493 to 0.6456, due to fears that the coronavirus would put a serious dent into China’s economic growth prospects. China is its biggest trading partner. If its growth slows, so will its demand for goods from the antipodean countries.
The Canadian dollar sank alongside the Australian and New Zealand dollars. China is Canada’s second-largest trade partner. The problem for Canada is oil. West Texas Intermediate (WTI) has plunged dramatically since the coronavirus outbreak, and the Canadian dollar usually correlates well with WTI prices.
The Canadian dollar continues to suffer from the Bank of Canada’s (BoC) dovish monetary policy flip-flop, on January 22. BoC Governor Stephen Poloz, in speeches and comments prior to the monetary policy meeting, implied the BoC would stick to a neutral policy outlook. They didn’t. Yesterday, Deputy Governor Paul Beaudry’s speech in Quebec, failed to shed any light on the new outlook. He said, “The same policy choice that helps the central bank attain its inflation target in the short run may be making it more difficult to attain its target in the longer run.”
Today is the day that the United Kingdom discards its membership in the European Union, but it doesn’t have any bearing on today’s GBPUSD strength. That is due to Bank of England Governor Mark Carney’s swan-song policy U-turn. The Bank of England left interest rates unchanged after Mr. Carney, and other Monetary Policy Committee (MC) officials indicated that a rate cut was in the cards. Two MPC voters opted to cut interest rates to 0.50% from 0.75%, but the other seven did not.
FX trading may be a tad messy today due to Canadian November GDP data, and month-end portfolio rebalancing flows.
Today’s Suggested Range USD/CAD: 1.3160 – 1.3260