Canadian Dollar Update, January 8, 2021 – Canadian Dollar Sideways
USD/CAD Open: 1.2678-82, Overnight Range: 1.2658-1.2743
WTI Oil is at $51.68 and gold is at $1,836.10. US markets are mixed today.
For today, USD resistance is at 1.2731. Support is at 1.2680.
• USDX and Treasury yields rise
• US NFP and Canada employment report on tap today
• US dollar opens mixed and close to unchanged
The Canadian dollar traded sideways in a narrow range overnight, as did the other G-10 major currencies as traders await the US nonfarm payrolls (NFP) data for December. Seasonal factors and COVID-19 fall-out suggest NFP will rise an unimpressive 75,000 in December. The Canadian employment picture is expected to be uglier, with the country losing 27,500 jobs.
Arguably, the twin employment reports will not have any lasting impact on FX. The weak data is due to the sharply rising number of new coronavirus cases and various measures to contain the spread.
The US political drama will continue to provide a distraction for markets but should have little impact on trading.
Wall Street closed with fresh record highs, US 10-year Treasury yields gained 1.12% overnight and are at 1.083%, and the US dollar index is trading at 89.89. The rising Treasury yields are underpinning the USDX. Equity traders are not concerned about higher yields after last year’s NASDAQ and S&P 500 performance. Why should they? Those indexes rose 43.6% and 16.3% respectively.
EURUSD traded in a 1.2214-1.2272 range and is sitting in the middle of that band in NY trading. This week’s drop from the 1.2345 peak is being chalked up to a short-dollar squeeze, as many traders were positioned for broad US dollar weakness in Q1 2021. Eurozone November unemployment fell to 8.3% from 8.5%, but the news was ignored. The EURUSD technicals are bullish while prices are above 1.2200, representing the uptrend line of the December rally.
GBPUSD remains rangebound in a 1.3540-1.3604 range. Traders are unwilling to commit due to the stringent coronavirus lockdown measures in the UK, which is capping the upside. However, hopes for a robust post-lockdown economic rebound are limiting losses.
USDJPY bears are getting concerned. Hopes that prices will drop to 101.20 are rapidly fading, thanks to the break above 103.90 overnight, which risks a retest of the 105.40 area. The currency pair is underpinned by broad US dollar strength and the steep rise in Treasury yields.
The Canadian dollar is getting a bit of additional support from this week’s surge in crude oil prices with WTI comfortably above $50.00/barrel. In addition, the Canadian dollar is entrenched in a steep uptrend since last March which suggests further gains ahead.
Today’s Suggested Range USD/CAD: 1.2670 – 1.2770