Canadian Dollar Update, July 27, 2021 – Canadian Dollar Drifting Lower
USD/CAD Open: 1.2541-42, Overnight Range: 1.2537-1.2594, Previous Close: 1.2542
WTI Oil is at $71.41 and gold is at $1,801.40. US markets are lower today.
For today, USD resistance is at 1.2602. Support is at 1.2556.
• Chinese stock meltdown undermines global equities
• Counting down to FOMC statement
• US dollar boosted by safe-haven demand
The Canadian dollar is drifting lower due to the deterioration of global risk sentiment.
USDCAD rallied in Asia, then consolidated the gains in a 1.2560-1.2591 range in Europe as safe-haven demand for US dollars underpinned the greenback.
A slew of anti-business regulatory moves by Chinese authorities that began in February came to a head yesterday when education companies were caught in regulatory crosshairs. China’s Shanghai Shenzhen CSI 300 index plunged 3.53% overnight, adding to the 3.2% drop on Monday. Investors in Chinese stocks have lost over $1.0 trillion since February.
European investors took note, and the major indices are all trading in negative territory. Wall Street futures are modestly lower, supported by hopes for strong earnings reports by Alphabet, Amazon, and Microsoft at the end of the day.
Oil prices are a tad higher, while gold prices have inched lower. US 10-year Treasury yields dipped to 1.265%, on safe-haven demand for bonds.
Nevertheless, the overnight price action should be taken with a grain of salt. The moves may be exaggerated due to thin summer markets, a lack of top-tier data, and caution ahead of Wednesday’s FOMC statement.
The Canadian dollar continues to garner some support from steady to firm crude oil prices, however that support is minimal as WTI oil in the $70.00-$75.00 is reflected in the exchange rate. Traders largely ignored domestic data, as the Bank of Canada appears committed to leaving interest rates unchanged until late in 2023.
Wednesday’s FOMC statement is not expected to have much impact on FX markets. Fed Chair Jerome Powell testified to Congress two weeks ago. He reiterated the Fed view that monetary policy would remain accommodative until there is “substantial further progress” in fulfilling the Fed’s mandate, “which has not been made.” Nothing has happened since then to change that outlook.
EURUSD traded in a 1.1771-1.1811 range. Price support stems from better than expected Eurozone data, including confidence surveys on Thursday and German GDP on Friday. However, the dovish ECB outlook continues to limit gains.
GBPUSD chopped about in a 1.3768-1.3930 range. Prices are supported by expectations for a steadily improving UK economy and the prospect for the Bank of England to tighten policy, while broad US dollar demand caps gains.
Today’s US data includes Durable Goods Orders for May, Case-Shiller Housing Prices, and July Consumer Confidence.
Today’s Suggested Range USD/CAD: 1.2500 – 1.2600