Canadian Dollar Update July 3, 2019 – Canadian Dollar shrugs off oil price weakness
USD/CAD Open: 1.3075-1.3076 Overnight Range: 1.3064-1.3120
Oil is at $56.90 and gold is at $1,416. US markets are higher today.
The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3130. Support is at 1.3037.
The Canadian dollar ignored yesterday’s sharp drop in West Texas Intermediate oil prices and traded narrowly in a quiet overnight session. Oil prices came under renewed selling pressure yesterday as President Trump’s threat to impose tariffs on EU imports stoked fears of a global growth slowdown. The President previously threatened 25% tariffs on car imports from the EU and his administration is reportedly considering tariffs on another $4.0 billion of EU products.
Trump’s latest attack on EU trade practices comes on the heels of a somewhat improved trade negotiation landscape between China and the US. China agreed to open up some of its markets and the US deferred promised new tariffs while the talks are going on.
OPEC and Russia agreed to extend production caps for another nine months, until March 2020, in an effort to shore up prices. At the moment, the tactic doesn’t appear to be working. West Texas Intermediate oil prices plunged from $59.40/barrel yesterday in Europe to $56.04 today in Asia. The plunge occurred despite the American Petroleum Institute reporting that US crude inventories declined 5.0 million barrels in the week ending June 28.
The US dollar opened in Toronto on a slightly weaker footing compared to yesterday’s closing levels. Sterling was the only currency that it managed to squeeze out a gain and was due weaker than expected UK Markit Service PMI data for June. PMI managers blamed Brexit uncertainty and a sluggish UK economy for the result.
EURUSD opened unchanged from yesterday’s Toronto close. Prices drifted in a narrow range overnight, and traders ignored modestly better than expected Eurozone Composite and Services PMI reports. Instead, they carefully watched the European Union’s shuffling of the leadership chairs. International Monetary Fund Managing director, Christine Lagarde, was nominated for President of the European Central Bank, to replace outgoing Mario Draghi. The nominations still need to be approved by the European Parliament. EURUSD drifted in a 1.1169-1.1194 range.
In Asia, USDJPY came under pressure and made a one-week low at 107.54 as a ripple of risk aversion sentiment washed over markets. Traders sold USDJPY, in part, because of Trump’s tariff threat against the EU. However, the primary catalyst was the fresh plunge in US Treasury yields to 1.941%.
Weaker than expected China Caixin Services PMI data fueled selling pressures in China’s Shanghai Shenzhen CSI 300 index, but AUDUSD and NZDUSD traders ignored that move. The antipodean currencies managed to squeeze out small gains.
There is a lot of US data on tap this morning because of the July 4th holiday tomorrow. Canada releases the Merchandise Trade Report. If exports are sharply weaker than expected, the Canadian dollar will be sold.
Today’s Suggested Range USD/CAD: 1.3030 – 1.3130