Canadian Dollar Update July 9, 2019 – Canadian Dollar retreating
USD/CAD Open: 1.3125-1.3126 Overnight Range: 1.3086-1.3134
Oil is at $57.73 and gold is at $1,396. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3148. Support is at 1.3096.
The Canadian dollar is retreating, and so far, it has been orderly. That could change if USDCAD prices break above resistance in the 1.3130-40 zone. If so, weak, short USDCAD positions would get squeezed and the rally could extend to 1.3230.
However, the Canadian dollar is slightly insulated from the worst of the broad US dollar moves against the G-10 majors thanks to rising West Texas Intermediate oil prices. Oil prices have increased from last week’s $56.10/barrel low to $58.16 this morning due to fresh fears of crude supply disruptions from the Middle East. Ongoing concerns about shrinking US crude inventories combined with the latest OPEC/Russia extension to production cuts are outweighing worries about a global growth slowdown, due to the US/China trade dispute.
Trade disputes with the US are the new “normal,” regardless of existing trade treaties. The Trump administration demonstrated that fact again overnight, slapping tariffs on Fabricated Structural Steel (FSS) imported from Mexico and China.
The commodity bloc currencies were sold on the back of the tariff news. AUDUSD dropped 0.62%, falling from 0.6974 to 0.6931 while NZDUSD dropped to 0.6607 from 0.6630. Australia’s NAB Business Confidence and Conditions Indices were as expected and didn’t help the currency.
The US dollar added to yesterday’s gains after traders downgraded their US rate cut expectations. Friday’s surprisingly strong US employment report led to markets reviewing forecasts for two Fed rate hikes in 2019. July rate cut expectations are unchanged, but the jury is still out as to the Feds appetite for additional cuts. That sentiment caught Canada dollar bulls off-guard, and the currency was sold.
USDJPY climbed on the downgrade US rate outlook as US Treasury yields surged, rising from 1.941% to 2.06% this morning.
The British pound was the biggest mover in overnight markets. GBPUSD plunged from 1.2521 to 1.2446 on heightened fears of a “no-deal” Brexit. Markets are afraid that if Boris Johnson becomes Prime Minister (and that is the most likely result of the Tory leadership contest), he will prorogue parliament to ensure a no-deal Brexit at the end of October.
Canada Housing Starts and Building Permits data are due today but should not be a trading factor ahead of tomorrow’s Bank of Canada meeting.
Today’s Suggested Range USD/CAD: 1.3075 – 1.3175