Canadian Dollar Update June 21, 2019 – Canadian Dollar basks in summer sunshine
USD/CAD Open: 1.3204-1.3205 Overnight Range: 1.3162-1.3216
The Canadian dollar was rangebound in overnight currency exchange markets. Oil is at $57.35 and gold is at $1,402. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3229. Support is at 1.3172.
The Canadian dollar held on to its recent gains despite a spate of safe-haven FX demand due to US and Iran tensions. A steep rise in West Texas Intermediate (WTI)oil prices played a significant role in limiting Canadian dollar downside during the early Asia turmoil.
The American government is livid that Iran had the audacity to shoot down a US military drone that was skirting Iran territory in the Strait of Hormoz. The US accused Iran of complicity in last week’s oil tanker attacks. Iran denied being involved, but the US decided to flex its military muscle. Iran’s outrage about a US military aircraft near their airspace is similar to how the US would respond if Iran flew drones off the Florida Keys.
The New York Times reported that President Trump authorized a military strike against Iranian radar installations and other military targets. Rumours of such move drove WTI to $57.76/barrel in early Asia trading, a 6.7% gain in less than twenty-four hours. Trump changed his mind and called off the action even as the planes were in the air. Oil prices pared their gains but are still trading at $57.63 in Toronto.
The US dollar started today’s session with modest gains against the G-10 major currency pairs except for the Euro and the Canadian dollar.
GBPUSD was the worst performing currency, falling from 1.2733 to 1.2644. The UK Tory leadership race is down to two contenders, Boris Johnson and Jeremy Hunt. Mr. Johnson is widely expected to win and become the next Prime Minister of the UK. He is also in favour of leaving the European Union, and GBPUSD is suffering consequently.
EURUSD is trading sideways. This morning’s round of mixed Markit Manufacturing PMI data for Germany and the Eurozone didn’t do anything to undermine European Central Bank (ECB) President Mario Draghi’s view that the Eurozone economy is slowing and more stimulus may be needed.
USDJPY dropped on the back of falling US Treasury yields and demand for safe-haven currencies. Prices have recovered from their overnight lows, coinciding with a rebound in Treasury yields. Prices got added support from news that US/China trade talks could resume as early as Tuesday.
Canada Retail Sales data for April is due this morning. The consensus forecast is for a rise of 0.2%, month over month, well below last month’s 1.1% gain. A result close to estimates will be expected, but a replay of the March results will trigger a sharp rise in the Canadian dollar.
Today’s US data is second tier. Next week is loaded with risk from Trade talks, data, and the G-20 which suggests traders may stay on the sidelines today.
Today’s Suggested Range USD/CAD: 1.3150 – 1.3250
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