Canadian Dollar Update, July 2, 2021 – Canadian Dollar Sinks on US Dollar Strength
USD/CAD Open: 1.2429-33, Overnight Range: 1.2405-1.2448, Previous Close: 1.2438
WTI Oil is at $75.09 and gold is at $1,785.80. US markets are higher today.
For today, USD resistance is at 1.2362. Support is at 1.2326.
• US Nonfarm payrolls expected to rise 700,000
• IMF upgrades US GDP growth forecast to 7.4% for 2021
• US dollar opens firm, but slips in early NY trading
The Canadian dollar came under pressure again yesterday, as the US dollar shrugged off month-end selling pressures. The US dollar was in demand following robust US data. Weekly jobless claims fell 51,000 to 364,000, and ISM Manufacturing PMI dipped to 60.6 from 61.2 in May due to supply chain issues.
The Canadian dollar traded lower overnight until profit-taking ahead of today’s NFP data gave the currency a bit of a lift. Wall Street gained with the S&P 500, finishing with its 6th consecutive record close. Canadian dollar direction continues to be determined by US dollar sentiment. However, the surge in crude prices above $75.00/b should limit Canadian dollar losses.
The US dollar is supported by upgraded GDP growth forecasts from the IMF and the Congressional Budget Office (CBO) due to the strong recovery from the pandemic and expectations that Biden’s spending plans will be approved. The CBO expects GDP to rise 7.4% in 2021, a steep upgrade to February’s forecast for 3.7% growth. In addition, the IMF raised their US 2021 GDP forecast to 7.0% from 4.6% in April, which, if correct, would mark the fastest US growth pace since 1984.
Yesterday Federal Reserve Bank of Philadelphia President said he was in the camp of starting tapering early, which kept that higher US rate story alive, even though he doesn’t have a vote.
Today’s US nonfarm payrolls data is expected to lead to a flurry of activity as the forecasts are all over the map. The consensus is for a gain of 700,000.
EURUSD traded in a 1.1821-1.1882 range since Thursday. Gains from higher than expected Eurozone Manufacturing PMI (actual 63.4 vs 63.1 in May) were reversed after better than expected US jobless claims and in anticipation of a robust NFP report today.
ECB President Christine Lagarde repeated her concerns that the Eurozone recovery “remains fragile.” The break below support at 1.1850 opens the door to steeper losses to 1.1705.
GBPUSD chopped lower since closing at 1.3833 on Wednesday, falling to 1.3739 in early NY trading today.
Overall US dollar demand, rising COVID-19 cases and negative risk sentiment are weighing on GBPUSD. The downtrend from June 11 is intact below 1.3840 and targets 1.3670.
USDJPY climbed from 111.00 to 111.62 yesterday and consolidated in a 111.35-111.65 range overnight. Traders have ignored the slide in US treasury yields as USDJPY is boosted by broad US dollar demand.
Today’s US data includes NFP, Goods and Services trade balance, ISM Business Conditions Index, and Factory Orders. The bond market will close at 2 pm, and US Markets are closed on Monday.
Canada Trade date data is on tap.
Today’s Suggested Range USD/CAD: 1.2300 – 1.2400