Canadian Dollar Update, July 24, 2020 – Canadian Dollar rally stalls
USD/CAD Open: 1.3420-24, Overnight Range: 1.3377-1.3445
WTI Oil is at $41.08 and gold is at $1,899.50. US markets are lower today.
For today, USD resistance is at 1.3458. Support is at 1.3389.
• Canadian dollar rally side-swiped by fresh risk aversion sentiment
• China orders closure of US consulate in Chengdu
• US dollar gains overnight, except against Swiss franc and Japanese yen
Canadian dollar buyers drove USDCAD down to significant support at 1.3350, yesterday. It held.
Prices rebounded and closed at 1.3407 as a wave of risk aversion sentiment washed over markets. US equities took a hit. The Dow Jones Industrial Average closed with a 1.31% loss after traders got spooked by the higher than expected US jobless claims numbers.
Another delay in the next US fiscal stimulus plan didn’t help, and neither did reports of rising COVID-19 deaths.
The negative sentiment carried forward into Asia, and then it got worse.
China ordered the US consulate in Chengdu to close, retaliating for the US demanding their Houston consulate be shuttered. Stock traders reacted badly and sold equities. The Shanghai Shenzhen CSI 300 index plunged 4.39%, leading the other major Asia indices lower. European bourses retreated in sympathy and US equity futures are in the red.
It wouldn’t be a stretch to suggest that the overnight market sell-off was more to do with prudent risk management, then the start of a prolong risk-averse period. The steep gains in equities and sharp US dollar losses against the major currencies suggest the overnight moves were merely profit-taking.
EURUSD broke above major resistance levels this week and is bouncing around either side of 1.1600. EURUSD is in demand due to improved growth prospects for the Euro area, following the EU summit, and the coronavirus fund relief measures. Prices were supported by better than expected Eurozone and German PMI data.
GBPUSD also benefitted from better than expected data. Retail Sales jumped 13.9% in June, compared to the forecast for an 8% gain. Manufacturing and Services PMI data beat expectations as well, which kept GBPUSD trading in a 1.2719-1.2772 range.
Safe-haven demand for Japanese yen drove USDJPY from 106.88 to 106.18. The downside slide may have been exaggerated because Japan was closed for a holiday.
AUDUSD dropped in concert with the G-10 majors, and Australia PMI data wasn’t a factor. NZDUSD ignored a tiny dip in its June Trade balance and tracked AUD moves.
There are not any actionable US or Canadian economic reports today and traders appear to be biased towards profit-taking ahead of the weekend.
Today’s Suggested Range USD/CAD: 1.3370 – 1.3470