Canadian Dollar Update July 8, 2019 – Canadian Dollar firm ahead of BoC
USD/CAD Open: 1.3066-1.3067 Overnight Range: 1.3049-1.3089
Oil is at $57.76 and gold is at $1,403. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3074. Support is at 1.3031.
The Canadian dollar is trading with a positive tone in early Toronto markets. Currency traders chalked up Friday’s Canadian Labour Report weakness (Canada lost 2,200 jobs) as merely “payback” following a string of robust gains. Also, the job losses were concentrated in the part-time category. Canadian dollar losses that followed a surprisingly robust US nonfarm payrolls report were short lived and nearly fully recouped by the end of the day.
The Canadian dollar is underpinned by Friday’s jump in West Texas Intermediate oil prices. Iran’s statement that it plans to produce enriched uranium beyond the EU treaty limits raised fears of an adverse reaction by the US.
The US dollar is a tad firmer in Toronto trading, compared to Friday’s close although the overnight price action was underwhelming. The Turkish Lira was hammered at the Asia open because Turkey President, Tayyip Erdogan, fired his Central Bank Chief. Like President Trump, Mr. Erdogan was unhappy with the Turkish Central Bank’s high interest rate policy. Fortunately, the drama was contained to Turkey.
EURUSD is grinding lower, weighed down by soft German data and ongoing fears that Mario Draghi’s dovish policies will be continued if IMF’s Christine Lagarde’s nomination as ECB chief is successful. Sales of EURCAD have contributed to Canadian dollar support.
The British pound remains under pressure and is flirting near January’s low. The risk of a snap UK election ahead of the October Brexit deadline is weighing on prices.
The US gained 224,000 new jobs in June, well above forecasts for an increase of 160,000. The report sparked a wave of US dollar buying as it gives the Fed an excuse to delay cutting the Fed funds range. Nevertheless, a 0.25 basis points rate reduction on July 31st, is fully priced in.
The NFP results boosted US Treasury yields, and that triggered USDJPY demand.
Canadian dollar traders are looking ahead to Wednesday’s Bank of Canada monetary policy statement and Governor Stephen Powell’s press conference. The statement is expected to be unequivocally neutral. The BoC will likely avoid anything that suggests a rate cut is in the cards. At the same time, the BoC will be loathe to suggest anything that triggers renewed Canadian dollar demand.
FX markets will be content to drift today, in part because of empty economic data calendars in Canada and the US. Traders will be looking ahead to Fed Chair Jerome Powell’s Semiannual Monetary Policy Report to the Congress, before the House Financial Services Committee on Wednesday.
Today’s Suggested Range USD/CAD: 1.3020 – 1.3120
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