Canadian Dollar Update, January 6, 2021 – Canadian Dollar Rally Resumes
USD/CAD Open: 1.2632-36, Overnight Range: 1.2629-1.2723
WTI Oil is at $49.98 and gold is at $1,931.00. US markets are mixed today.
For today, USD resistance is at 1.2762. Support is at 1.2621.
• Democrats win one seat, leading in the other
• WTI oil prices soar on improved risk sentiment and Saudi cuts
• US dollar on the defensive
The Canadian dollar rallied overnight, alongside the rest of the G-10 major currencies. USDCAD closed at 1.2669 yesterday and dropped to 1.2632 just before NY opened. Profit-takers emerged, and prices rallied back to 1.2690.
The Georgian Senate-run-off vote is gripping markets. Democrat Raphael Warnock won his seat over incumbent Republican Senator Kelly Loeffler. The other Democrat candidate Jon Ossoff has a tiny lead over his opponent.
The Senate race matters to markets because if the two Democrat candidates win, Joe Biden’s government has control over the House and the Senate, making it easier for them to enact legislation. If so, analysts expect substantially higher fiscal spending, giving a boost to global economic growth and undermining the US dollar. They expect the new administration to increase corporate taxes, shift the focus to clean energy, and more money for Obamacare.
Risk sentiment got an added boost from oil prices. Yesterday Saudi Arabia surprised markets and OPEC members, by announcing they would trim their oil production by 1 million barrels/day as of February 1. WTI spiked from $48.00/b on Tuesday to $50.56/b overnight, before slipping to $50.00 in early Toronto trading.
The Canadian dollar which was already climbing from the improved global risk sentiment, got an added lift from the Saudi news.
Elsewhere, EURUSD broke above another major resistance level when it traded through 1.2330, setting the stage for additional gains to 1.2525. Traders were not concerned with the slew of worse than expected Services PMI reports in Germany and around the eurozone, as they were impacted by COVID-19.
GBPUSD is consolidating its December games in a 1.3550-1.3700 range with plenty of travel time in between. Prices are supported by the Brexit trade deal news but the lockdown measures from the latest outbreak of COVID-19 are weighing on prices.
In Asia, the Caixin December Services PMI (actual 56.3 vs Nov. 57.8) added support to the positive risk mood, and underpinned the Australian and New Zealand dollars. AUDUSD continues to be in demand in part, due to high iron ore prices.
The People’s Bank of China said they will make monetary policy “more flexible, targeted, and appropriate“ in 2021.
Traders are looking ahead to the release of the FOMC meeting minutes.
Today’s Suggested Range USD/CAD: 1.2630 – 1.2730