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Canadian Dollar Update, July 22, 2020 – Canadian Dollar struggles to rally

USD/CAD Open: 1.3452-56, Overnight Range: 1.3419-1.3483

WTI Oil is at $41.36 and gold is at $1,849.80 US markets are higher today.

For today, USD resistance is at 1.3448. Support is at 1.3407.

• US dollar bears are in control
• Gold (XAUUSD) soaring on low global interest rates, COVID-19 risks, and geopolitical tensions
• COVID-19 vaccine hopes swap rising coronavirus fears
• WTI oil prices dip as US crude inventories rise

Canadian dollar demand is lagging that of the other commodity currencies and rather dramatically. Since Friday, the Australian dollar rose 3.1%, the New Zealand dollar gained 1.75%, and the Canadian dollar eked out a 0.80% gain. That is due to several factors.

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Reserve Bank of Australia Governor Philip Lowe said this week that the domestic economy had “turned a corner,” while pointing out that the currency’s value reflected fundamentals. He also suggested that there was little risk of lower rates any time soon. Australia and New Zealand are also benefitting from the rebound in China’s economy as China is their largest trading partner.

Canadian dollar gains are hampered by oil prices and domestic economic issues. OPEC and Russia agreed to remove the emergency 2.2 million barrel/day production cut that was initiated in April, by August 1. Oil prices had risen in anticipation of the news, but the rally stalled at $42.35/barrel. Upside momentum has been capped by the renewed outbreak of coronavirus in the US, Hong Kong, and Australia. Traders are concerned that crude demand will lag that of supply, especially with the added production.

Finance Minister Bill Morneau forecasted that Canada’s 2020 budget deficit would be over $343.0 billion. It will be higher, especially after the government announced extensions to some of the COVID-19 income relief programs. The government also announced that the US/Canada border would remain closed to non-essential travel, until August 21.

President Trump isn’t helping matters. He slapped new tariffs on Canadian aluminum imports, and escalated US/China tensions. Trade and China were the foundation of his 2016 election campaign, and his poor polling scores suggest he has dusted off the same playbook for the 2020 election.

The US ordered China to close their Houston Consulate, in Texas.

They said it was necessary to protect American intellectual property and private data. At the same time, they are asking China to step up purchases of US agricultural products as agreed in the Phase 1 trade pact.

Canada inflation data is on tap today. It will be a non-event as the BoC predicted a low inflation environment for a while, so today’s results will not have any impact on monetary policy.

Today’s Suggested Range USD/CAD: 1.3400 – 1.3500

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By KBFX | July 22, 2020 | Daily Update | 0 comments