Canadian Dollar Update, July 19, 2021 – Canadian Dollar Falls off a Cliff
USD/CAD Open: 1.2756-60, Overnight Range: 1.2609-1.2806, Previous Close: 1.2614
WTI Oil is at $67.24 and gold is at $1,808,70. US markets are lower today.
For today, USD resistance is at 1.2805. Support is at 1.2709.
• Coronavirus outbreaks, US/China tensions, and risk aversion lift US dollar
• Canadian dollar plunges 1.5% since Friday close
• US dollar opens with strong gains vs G-10; GBP and JPY are expectations
The Canadian dollar lost over 1.5% of its value against the US dollar in overnight trading. A litany of woes transpired to pummel the currency, with plunging crude prices leading the way. A nearly 3% slide in West Texas Intermediate oil prices, combined with new COVID-19 delta variant cases in Europe and Australia, and heightened tensions between China and the US, triggered a stampede into safe-haven US dollars.
Opec and Russia reached an agreement with the United Arab Emirates. The UAE’s base production level was increased along with other cartel members, and production is being increased by 400,000 barrels per day, beginning in August and continuing until the end of 2022.
The drop in oil prices exacerbated negative Canadian dollar sentiment following last week’s more dovish than expected Bank of Canada policy meeting. Traders were unhappy with BoC downgrading 2021 economic growth to 6.0% from 6.5% in April, and took it out on the currency.
USDCAD technicals are bullish while trading above 1.2405, supported by the break above the downtrend line from last November. The break above 1.2650 overnight sets the stage for a test of 1.3000.
Widespread safe-haven demand for US dollars made the Canadian dollar the worst-performing currency compared to the US dollar. The Australian and New Zealand dollars were not far behind, losing 1.0% and 0.77% respectively.
USDJPY dropped from 110.09 to 109.62 due to US 10-year Treasury yields falling to 1.248% from 1.30%, and safe-haven demand for yen.
EURUSD is trading at key support after dropping from 1.1813 to 1.1766 overnight. Risk-aversion pressures are exacerbated by new COVID-19 restrictions in France, and Germany, and due to economic growth concerns from flooding in many areas. Traders are also worried about the ECB meeting on Thursday, especially when recent CPI reports highlighted the divergent inflation rates between the US and Eurozone.
GBPUSD fell to 1.3702 from 1.3773 as slowing UK growth fears exacerbated the risk-aversion fueled sell-off. However, GBPUSD has strong support in the 1.36750 zone.
AUDUSD underperformed as delta-variant coronavirus outbreaks, soft commodity prices, and last week’s dovish RBA policy meeting weigh on prices. NZDUSD traded lower but outperformed AUDUSD.
There are no economic reports of note today.
Today’s Suggested Range USD/CAD: 1.2705 – 1.2805