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Canadian Dollar Update, July 16, 2020 – Canadian Dollar attempts a rally

USD/CAD Open: 1.3531-35, Overnight Range: 1.3501-1.3545

WTI Oil is at $41.05 and gold is at $1,806.50. US markets are lower today.

For today, USD resistance is at 1.3568. Support is at 1.3489.

• Minor “risk-off” ripple lifts US dollar
• Bank of Canada “uncertain”, leaves rates and policy unchanged
• ECB interest rate decision is a non-event

The Canadian dollar’s fortunes took a turn for the better yesterday. USDCAD traded at 1.3617 in early Asia hours on Wednesday, coinciding with EURUSD probing support in the 1.1330-40 area. The single currency rejected further weakness and bounced with a vengeance, rising to 1.1446, and knocking USDCAD down to 1.3502, in the process. Momentum waned and profit taking led to a US dollar bounce into the close.

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The US dollar rally continued in Asia. Ongoing tensions between the US and China, alongside rising US coronavirus concerns, led Chinese stock traders to take advantage of the nearly 11.0% rally in the Shanghai Shenzhen CSI 300 index, since July 1, to book profits. The index closed with a loss of 4.81%, helping to drive the other main Asia indexes lower, as well.

The equity market sell-off contrasted with robust China Q2 GDP growth of 11.5% q/q. That news was soured by a 1.8% y/y drop in Retail Sales in June.

Some pundits attributed yesterday’s Canadian dollar gains to the Bank of Canada’s monetary policy statement and Monetary Policy Report (MPR). Not so. The BoC left rates unchanged and the MPR outlook was “uncertain.” The policy statement said they expect real GDP to decline by 7.8% in 2020. They also appeared to put to rest any lingering fears about near term rate hikes. They noted; “As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In addition, to reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at a pace of at least $5 billion per week of Government of Canada bonds.”

Today’s key US data includes jobless claims, June Retail Sales, and the Philadelphia Fed Manufacturing Index.

Today’s Suggested Range USD/CAD: 1.3480 – 1.3580

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By KBFX | July 16, 2020 | Daily Update | 0 comments