Canadian Dollar Update, January 5, 2021 – Canadian Dollar Rally Hits Wall
USD/CAD Open: 1.2738-42, Overnight Range: 1.2730-1.2791
WTI Oil is at $49.66 and gold is at $1,945.40. US markets are higher today.
For today, USD resistance is at 1.2809. Support is at 1.2682.
• Risk-sentiment improves after souring yesterday
• Georgia Senate run-off vote today
• US dollar gives back some of yesterday’s gains
FX markets went on a giant roller-coaster ride yesterday and were on the kiddie version of the ride overnight. The Canadian dollar was sitting pretty at a 33-month peak early morning yesterday.
Then it got ugly. Wall Street opened at a record high, but things quickly soured, and prices plunged with the S&P 500 index falling 1.48%. Concerns ahead of today’s Georgia Senate run-off vote and soaring new numbers of coronavirus cases fueled risk-off sentiment. USDCAD touched 1.2668 early Monday morning and soared to 1.2793 by lunch-time.
It was a different story overnight. Asia equity traders did not seem as concerned as their Wall Street counterparts. Japan’s Nikkei 225 closed with a small loss, while China’s Shanghai Shenzhen CSI 300 index climbed 1.26%. European bourses have ceded early gains and are modestly lower, as have US equity futures.
Gold and oil prices are higher.
The FX and equity price action so far this year is evidence that markets are concerned that the anticipated US dollar downtrend in 2021 will not be a one-way street. Traders are quick to protect profits, but also want to sell US dollars on corrections.
GBPUSD rallied to 1.3702 yesterday, but prices plunged when risk sentiment soured. GBPUSD dropped to 1.3540 after UK Prime Minister Boris Johnson announced new COVID-19 lock-down measures for the entire country, like what was seen last spring.
EURUSD cracked above 1.2300 on Monday but could not sustain the move. Prices subsequently dropped to 1.2240 before grinding back higher in Asia and reaching 1.2288 in early NY trading. The single currency continues to be supported by expectations that pending US fiscal stimulus, and hopes for a COVID-19 vaccine fueled global economic rebound.
USDJPY is weighed down by broad US dollar weakness and seasonal selling pressures. However, losses may be slowed due to a coronavirus outbreak in Japan. Prime Minister Suga said a decision about imposing a State of Emergency would happen Thursday.
AUDUSD was the worst-performing G-10 major currency yesterday, and is the best performing currency today, compared to yesterday’s NY closing levels. The currency pair was underpinned by a surge in the Chinese yuan, and higher iron-ore prices. The Australian dollar is often seen as a proxy to risk sentiment, and its overnight rally signalled an improvement in the risk tone.
The US ISM Manufacturing PMI report for December is expected at 56.6
Today’s Suggested Range USD/CAD: 1.2690 – 1.2790