Canadian Dollar Update, January 7, 2021 – Canadian Dollar Suffers from US Unrest
USD/CAD Open: 1.2730-34, Overnight Range: 1.2663-1.2734
WTI Oil is at $50.95 and gold is at $1,914.60. US markets are higher today.
For today, USD resistance is at 1.2755. Support is at 1.2689.
• Congress confirms Biden as President, Democrats control House and Senate
• Global equities mixed to higher as are US Treasury yields
• US dollar regains its footing opens in NY with gains
The Canadian dollar rally ended abruptly when European markets opened for business. Traders were spooked by Wednesday’s protest on the US Capitol.
A semblance of calm returned to markets after Trump said “Even though I totally disagree with the outcome of the election, and the facts bear me out, nevertheless there will be an orderly transition on January 20th”.
Nevertheless, that day is still two weeks away, and a lot can happen.
Stock markets were mostly unconcerned. The Nikkei 225 rose 1.6% even after 7,000 new coronavirus cases were reported, and Prime Minister Suga declared a state of emergency for Tokyo and the surrounding area. European equity indexes are higher, except for the UK FTSE 100, which is giving back some of yesterday’s gains. Wall Street is set to open in positive territory.
EURUSD retreated from 1.2344 to 1.2246 in an abundance of caution due to US politics. The fall halted above the 1.2230 support level. The decline may be temporary as the new Biden administration’s control of the House and Senate implies a larger budget deficit and higher growth.
There was plenty of Eurozone economic data. No one cared as it was either a result of the coronavirus or expected. Eurozone Retail Sales fell 2.9% y/y in November. Inflation was an as-expected -0.3% y/y, while the Economic Sentiment indicator improved to 90.4 from 87.7.
GBPUSD fell to 1.3558 from 1.3632 before inching higher to 1.3585 in NY trading. Traders are a tad concerned about the toll the current COVID-19 lock-down restrictions will take on the economy, which overshadowed the positive longer-term growth outlook with the Brexit trade deal.
USDJPY rallied on the back of higher US Treasury yields. 10-year Treasury yields have climbed from 0.925% at the beginning of the week to 1.0660 overnight.
The US dollar rally knocked AUDUSD and NZDUSD lower. AUDUSD fell to 0.7733 from 0.7816, however firm iron-ore prices, and bullish technicals slowed losses.
The Canadian dollar price action will continue to mirror that of the antipodean currencies. Today’s US and Canadian economic reports will not have much impact on markets.
Today’s Suggested Range USD/CAD: 1.2680 – 1.2780