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Canadian Dollar Update, July 8, 2020 – Canadian Dollar vulnerable to Federal Budget update

USD/CAD Open: 1.3601-05, Overnight Range: 1.3535-1.3623

WTI Oil is at $40.70 and gold is at $1,824.40. US markets are higher today.

For today, USD resistance is at 1.3627. Support is at 1.3479.

Canada Finance Minister expected to announce budget deficit of over $300 billion
• Rising US COVID-19 cases put traders on the defensive
• US dollar opens little changed from yesterday’s Toronto close

The Canadian dollar is the only major G-10 currency to have weakened against the US dollar in the past 24 hours. That could be due to an undercurrent of “sell North America” sentiment permeating FX markets, as the Mexican peso is also weaker. WTI oil prices were steady and not a factor for USDCAD traders. The Canadian dollar appears to be well-correlated with US equities. Wall Street closed with losses which supported USDCAD.

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Federal Finance Minister Bill Morneau is delivering a budget update today, and a high deficit is expected due to the pandemic.

Although other G-10 countries are in a similar state, the ballooning government deficit and the loss of oil-patch revenues suggests the Canadian dollar is vulnerable to further weakness.

Longer-term USDCAD technicals also support a weaker Canadian dollar view. The USDCAD uptrend from January is still intact while prices are above 1.3440. A move above the 1.3630 area targets 1.3795.

The Canadian dollar is not getting much support from crude oil prices. West Texas Intermediate continues to hover around the $40.00/barrel level. OPEC production cuts and the re-opening of global economies are underpinning prices on hopes for increased demand.

Unfortunately, the resurgence of coronavirus cases in the US suggests demand may be curtailed, in the short-term.

The US reported 60,000 new COVID-19 cases yesterday, another daily record. Some states that had started re-opening have reversed those steps, even though President Trump continues to say the higher number is due to more testing.

FX markets were choppy but directionless overnight. USDJPY suffered from renewed safe-haven demand on the back of the US coronavirus news.

Today’s Suggested Range USD/CAD: 1.3530 – 1.3630

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By KBFX | July 8, 2020 | Daily Update | 0 comments