Canadian Dollar Update, July 5, 2021 – Canadian Dollar Climbs As Tapering Concerns Ease
USD/CAD Open: 1.2345-49, Overnight Range: 1.2314-53, Previous Close: 1.2324
WTI Oil is at $76.12 and gold is at $1,791.30. US markets are higher today.
For today, USD resistance is at 1.2374. Support is at 1.2293.
• US NFP reduces concerns about Near-term Fed Tapering
• OPEC meeting continues
• US dollar opens on the defensive on US holiday
The Canadian dollar rallied following Friday’s US employment report, then consolidated its gains overnight.
The nonfarm payrolls data showed a gain of 850,000 jobs, which easily beat the forecast for a 700,000 increase.
However, the details were disappointing as almost all the gains were in sectors that were the hardest hit by the pandemic. Also, the unemployment rate ticked higher to 5.9%. The result was analysts downgraded expectations that the Fed would be forced to begin tapering QE purchases ahead of schedule.
USDCAD dropped from a pre-NFP level of 1.2450 and hit 1.2314 in Asia. The steep plunge was due to broad US dollar selling pressures, as analysts re-evaluated their FOMC outlook. In addition, West Texas Intermediate (WTI) oil prices are trading above $75.00/ barrel. The OPEC meeting has been extended due to a difference of opinion between the United Arab Emirates (UAE) and Saudi Arabia over crude production levels. The UAE is demanding an increase to its baseline production quota, which Saudi Arabia opposes.
US markets are closed as America celebrates its Independence Day. Asia markets were quieter than usual, and the major Asia equity indexes closed on a mixed note. Caixin China Services PMI at 50.1 was below the 55.1 expected, which caused some concern about the strength of the global recovery. European stock markets are trading quietly but are modestly higher. Wall Street equity futures are flat.
EURUSD traded in a 1.1852-1.1880 range, with prices supported by post-NFP US dollar selling pressures, and better than expected Services and Composite PMI data. The move above 1.1840 turned intraday FX sentiment positive with a break above 1.1880, targeting 1.1950.
GBPUSD enjoyed a steep post-NFP rally, rising from 1.3735 Friday, to 1.3860 today. The gains are fueled by robust June Services PMI data, and UK government plans to fully open the economy by July 19.
USDJPY dropped from 111.65 Friday to 110.81 today, with falling 10-year Treasury yields and increased support for Fed Chair Powell’s monetary policy outlook, weighing on prices.
AUDUSD rallied along with the G-10 major currencies. However, gains may be capped if tomorrow’s Reserve Bank of Australia monetary policy statement is dovish.
The quarterly Bank of Canada Business Outlook Survey is released today and expected to show an upbeat outlook.
Today’s Suggested Range USD/CAD: 1.2290 – 1.2390