Canadian Dollar Update, July 26, 2021 – Canadian Dollar Gains May be Limited
USD/CAD Open: 1.2549-53, Overnight Range: 1.2547-1.2589, Previous Close: 1.2547
WTI Oil is at $72.16 and gold is at $1,797.20. US markets are higher today.
For today, USD resistance is at 1.2558. Support is at 1.2524.
• Canadian dollar in downtrend channel
• EURUSD shrugs off soft German IFO data
• China regulatory actions sour risk sentiment
The Canadian dollar dropped in Asia, then recouped its losses in Europe. A bout of risk aversion sentiment stemming from Chinese regulatory actions knocked the commodity currency bloc for a loop.
Chinese regulators banned companies that offer tutoring on school curriculum from going public or raising capital; listed firms may no longer acquire or invest in firms teaching school subjects. The move followed on the heels of regulatory actions against Chinese internet companies.
China also increased restrictions related to local state government financing vehicles, and the PBoC asked lenders to increase mortgage rates for first-time homebuyers.
The China Shanghai Shenzhen CSI 300 fell 3.22% to 4,925.30 on the news, which soured FX risk sentiment.
Chinese diplomats go into the act as well. Vice Foreign Minister Xie Feng warned US Deputy Secretary of State Wendy Sherman that the China/US relationship was in a stalemate and faced serious difficulties.
European equity indexes are trading with losses, and S&P 500 futures are pointing to a lower open on Wall Street. Traders are cautious ahead of Q2 earnings reports from Tesla at the end of today and Alphabet and Microsoft tomorrow.
The FOMC meeting statement is Wednesday. Traders will look for insight into the taper discussions.
EURUSD recouped Asia losses and is trading near session highs in NY. German IFO survey data missed forecasts. The Business Climate Index for Germany fell to 100.8 points in July, down from 101.7 points in June (seasonally adjusted.). Companies evaluated their current business situations as somewhat better, but their expectations for the coming months were significantly less optimistic. Supply bottlenecks and concerns over newly rising infection numbers are weighing on the German economy.
GBPUSD is trading with a mildly positive tone, rising from 1.3739 to 1.3798, as fears around higher coronavirus infections fade. However, ongoing tensions between the UK and EU over the Northern Ireland border may limit gains.
USDJPY traded defensively due to negative risk sentiment. However, rising US 10-year Treasury yields limited the downside.
AUDUSD and NZDUSD traded lower due to China’s domestic actions. NZDUSD losses were exacerbated by a small drop in New Zealand’s trade surplus, but those losses were recovered by the NY open.
The Canadian dollar downtrend from the middle of June is intact and traders are awaiting fresh direction from this week’s economic data. Canada inflation and GDP reports are due Wednesday and Friday, respectively.
Today’s Suggested Range USD/CAD: 1.2500 – 1.2600