Canadian Dollar Update, July 6, 2021 – Canadian Dollar Underpinned by Oil
USD/CAD Open: 1.2353-57, Overnight Range: 1.2305-1.2362, Previous Close: 1.2341
WTI Oil is at $73.41 and gold is at $1,795.70. US markets are lower today.
For today, USD resistance is at 1.2530. Support is at 1.2434.
• OPEC impasse lifts oil prices
• Traders awaiting FOMC minutes, due Wednesday
• US dollar grinds out gains on inflation concerns
The Canadian dollar rallied in Asia, retreated in Europe, and opened close to unchanged in NY. Oil prices, antipodean currency movements, and inflation concerns, combined to roil the domestic currency.
West Texas Intermediate (WTI) oil surged from $75.00 yesterday to $76.95/ barrel in Europe before drifting down to $76.25 in NY trading. The price volatility stems from OPEC’s failure to agree on the duration of production cut quotas. The cartel planned to raise production by 2.0 million barrels per day, beginning August 1, but the deal fell apart when the United Arab Emirates (UAE) balked at a proposed extension of existing cuts beyond the March 22 end date. As a result, the meeting ended, and the proposed August production increase is off the table for now.
FX traders see inflationary implications from rising oil prices and bought US dollars. Gold prices climbed to $1809.09 from $1791.16 due to negative risk sentiment. Bond traders didn’t seem to care as US 10 year Treasury yields languished at recent lows.
Yesterday, Bank of Canada Business Outlook Survey (BOS) was relatively upbeat with expectations for future sales, investment intentions, and employment intentions suggest robust domestic economic growth. More than half of survey respondents expect price increases to be temporary, at least for the next 12 months.
AUDUSD and NZDUSD were the best performing currencies overnight, with the latter rising 0.89% compared to Monday’s NY open.
The New Zealand Institute of Economic Research (NZIER) Business Confidence index jumped to 7% q/q compared to -13% q/q previously. The Institute said, “These results suggest the recovery in the New Zealand economy will remain robust over the coming year.”
The results led ASB and Bank of New Zealand to forecast a rate hike in November 2021. NZDUSD climbed to 0.7104 from 0.7023.
AUDUSD rose 0.60% following the Reserve Bank of Australia’s (RBA) widely expected announcement that QE purchases would be tapered from $5.0 billion per week to $4.0 billion. The RBA left the OCR rate unchanged at 0.10%. The RBA statement repeated that a rate hike is unlikely before 2024. However, Governor Philip Lowe said, “I want to re-emphasise the point that the condition for an increase in the cash rate depends upon the data, not the date; it is based on inflation outcomes, not the calendar.”
Traders are looking ahead to the ISM Services PMI data today and the FOMC minutes tomorrow.
Today’s Suggested Range USD/CAD: 1.2430 – 1.2530