Canadian Dollar Update, July 7, 2020 – Canadian Dollar looking for direction
USD/CAD Open: 1.3570-74, Overnight Range: 1.3524-1.3588
WTI Oil is at $40.60 and gold is at $1,809.10. US markets are mixed today.
For today, USD resistance is at 1.3602. Support is at 1.3551.
• Risk sentiment takes a negative turn
• Global equity indexes trade lower overnight
• Canadian dollar directionless inside well-defined range
The Canadian dollar traded sideways overnight. Global risk sentiment turned negative after Asia equity traders ignored Wall Street price action and focused on rising American coronavirus cases. A surge in COVID-19 cases since July 1 forced some states to reimpose restrictions, including mandatory face coverings inside buildings. Asian equity indices closed lower, except in China, where the Shanghai Shenzhen CSI index added 0.60% to yesterday’s 5.7% gain. European bourses are lower across the board, and S&P 500 futures suggest a negative open on Wall Street.
EURUSD has recouped a small portion of its overnight losses in early Toronto trading. The single currency fell from 1.1331 to 1.1260 before inching higher to 1.1285. Traders ignored data and EU Commission forecasts. German Factory orders rose 7.8% m/m in May, well above the 17.5% plunge in April. The EU Commission released its Summer 2020 Economic Forecast. It was bleak. They downgraded GDP growth to -8.7% (it was -7.7 in Spring forecast), blaming the revision on a worse than expected economic impact from the coronavirus.
GBPUSD tracked EURUSD moves with intraday technicals modestly bullish while prices are above 1.2460. Traders are looking for a break above the 1.2550-70 to revisit the July peak of 1.2805. However, ongoing concerns about the state of the EU/UK trade talks are acting as a drag to topside moves.
USDJPY didn’t appear to suffer from safe-haven demand. Prices inched higher overnight, trying to break resistance at 107.70 to spark another up-leg to the current rally. Steady US Treasury yields and hopes for a robust global economic recovery are underpinning prices.
AUDUSD did not get any support from the Reserve Bank of Australia monetary policy meeting. That is because the results were expected. Instead, traders took their lead from souring risk sentiment and drove AUDUSD down from 0.6996 to 0.9624. Prices have since bounced and are trading in Toronto at 0.6942.
The Canadian dollar continues to be at the mercy of broad US dollar sentiment with domestic data, and Bank of Canada (BoC) updates ignored by traders. Yesterday the BOC released its quarterly Business Outlook Survey (BOS).
It wasn’t pretty. The BOS said “Results from the summer Business Outlook Survey suggest that business sentiment is strongly negative in all regions and sectors due to impacts from the COVID‑19 pandemic and the drop in oil prices. Firms reported that weak demand is reducing both capacity pressures and expectations for price growth.”
Canada IVEY PMI data is due today, but it won’t be a factor for traders.
Today’s Suggested Range USD/CAD: 1.3520 – 1.3620