Canadian Dollar Update July 4, 2019 – Canadian Dollar grinding out gains
USD/CAD Open: 1.3060-1.3061 Overnight Range: 1.3053-1.3086
Oil is at $56.86 and gold is at $1,417. US markets are higher today.
The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3085. Support is at 1.3043.
The Canadian dollar is still grinding out gains. The rally that began on July 17 is intact, but further gains are a bit of a struggle to a plethora of technical resistance levels. The Canadian dollar has benefited from a rebound in the domestic economy. Economic weakness in the first few months of 2019 gave rise to speculation that the Bank of Canada would be forced to cut interest rates. The BoC, on the other hand, wasn’t nearly as pessimistic with its outlook, and they were still calling for a rate increase.
The May 29 policy statement said that “continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary. Recent data supports a pickup in both consumer spending and exports in the second quarter, and it appears that overall growth in business investment has firmed. Overall, recent data has reinforced Governing Council’s view that the slowdown in late 2018 and early 2019 was temporary, although global trade risks have increased. In this context, the degree of accommodation being provided by the current policy interest rate remains appropriate”.
The next BoC monetary policy meeting is Wednesday, July 10. The spate of better than expected economic reports warns that the statement may be more neutral than dovish, which would underpin the Canadian dollar even more.
The Canadian dollar rally was not just because of domestic issues. Widespread US dollar selling against the major G-10 currencies was a major contributing factor to the gains. President Trump’s continued criticism of the Fed Chair, Jerome Powell, and the Fed’s monetary policies were not to subtle calls for a weaker US dollar. Trump even tweeted about the “strong dollar”.
US Treasury yields have dropped sharply, and that led to a narrowing of US/CAD interest rate differentials, which provided another layer of support to the Canadian dollar.
The Canadian dollar traded sideways in a quiet overnight session with activity hampered by today’s US July 4th holiday. The lack of US markets and a shortage of actional European economic data ensured a dull European session as well.
There aren’t any Canadian economic reports available today and the US holiday suggests the Toronto FX session will be very quiet.
Today’s Suggested Range USD/CAD: 1.3010 – 1.3110
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