Canadian Dollar Update, July 30, 2020 – Canadian Dollar smacked as risk sentiment sours
USD/CAD Open: 1.3407-11 Overnight Range: 1.3330-1.3459
WTI Oil is at $39.97 and gold is at $1,940.50. US markets are mixed today.
For today, USD resistance is at 1.3472. Support is at 1.3402.
• FOMC confirms Fed’s dovish stance, minor tweaks to statement
• German GDP plunge spooks risk markets
• US opens with gains against the majors except for GBP
The Canadian dollar snapped a nearly two-week uptrend, following a surge of US dollar demand during the European session. USDCAD tested support in the 1.3330 area yesterday before Toronto opened and again in Asia overnight. Both times it held. Risk sentiment turned negative n Asia, as oil and gold prices slid. USDCAD soared, and then accelerated in Europe after weak German GDP data.
German Q2 GDP fell 10.1%, the worst performance ever. It shouldn’t have been a surprise to anyone, as the impact of measures to combat the coronavirus pandemic were well known.
Nevertheless, EURUSD dropped from 1.1792 in Asia to 1.1732. Prices inched higher in early Toronto trading. The weak data served notice that the economic ramifications from COVID-19 will be around for a while, leading to some traders taking profits after EURUSD rise this week.
The FOMC delivered what the market expected. They left policy unchanged and appeared content to wait and see the impact from their earlier measures and the Federal government’s stimulus packages. The statement declared “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
US interest rates will not be changing any time soon. The statement said: “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Mr. Powell further clarified that stance in the press conference. He said “we are not even thinking about interest rates. The economy will need our support for an extended period.”
GBPUSD found a bottom at 1.2946 just before Europe opened, then climbed to 1.3010 following the German data. Sales of EURGBP fueled the rally. GBPUSD is holding those gains in early NY trading, awaiting the upcoming US data.
AUDUSD and NZDUSD were reasonably steady until just before Europe started. Weaker than expected Australia building permits data, combined with soft commodity prices, and renewed 2nd wave pandemic fears, sent prices tumbling.
Traders may react negatively to US Q2 GDP falling 32.9%. The economy is expected to have been trashed thanks to the pandemic, but seeing the number may spook markets.
US jobless claims are forecast at 1.45 million, higher than last week and evidence US growth is stumbling.
Today’s Suggested Range USD/CAD: 1.3360 – 1.3460