Canadian Dollar Update, June 27, 2022 – Canadian Dollar Tracking Risk Sentiment
USD/CAD Open: 1.2888-92, Overnight Range: 1.2867-1.2915, Previous Close: 1.2894
WTI Oil open at $107.97 and gold is at $1,838.19. US markets are mixed today.
For today, USD resistance is at 1.2906. Support is at 1.2851.
- Positive risk sentiment starting to fade in early NY trading
- US interest rate outlook overshadows geopolitical tensions
- US dollar opens modestly lower in positive risk environment
The Canadian dollar is directionless inside the well-traveled USDCAD range of 1.2840-1.2960. The prevailing outlook for US interest rates determines the Canadian dollar price direction, but for the moment, month, quarter, and half-year end portfolio rebalancing flows will be the main driver.
The rebalancing flows suggest broad US dollar demand due to the steep fall in the S&P index in June.
Canada Finance Minister Chyrstia Freeland tried to spin the Canadian economic outlook in a positive light in a CTV interview on Sunday. She said Canada still has a “path for a soft-landing”. She said she was open to helping Canadians impacted by inflation, then said, “I have to strike a balance. One is supporting Canadians with affordability challenges, and the other is fiscal restraint because I don’t want to make the Bank of Canada’s job harder than it already is.”
Russia has defaulted on its sovereign debt after Moscow failed to make a $100 million interest payment. The default is somewhat dubious as Russia has the money, but the West has blocked its access to US dollar payments.
Elsewhere, G-7 leaders are considering plans to cap the price of Russian oil to a level where it cannot afford to fund its war in Ukraine.
The plan calls for banning insurance coverage on tankers containing Russian oil if the value of the cargo is above a certain limit.
FX markets were choppy but remained well-within recent trading bands.
EURUSD ratcheted higher in a 1.0551-1.0590 range with bullish traders empowered by Friday’s Michigan survey which revised long-term inflation expectations lower.
GBPUSD traded in a 1.2256-1.2331 range. Prices dropped from the peak after a KPMG report warned of a recession in 2023.
USDJPY rallied from 134.53 to 135.27 supported by firming US 10-year Treasury yields and the BoJ Summary of Opinions which said the central bank needs to maintain easy monetary policies.
AUDUSD traded in a 0.6909-0.6957 range supported by firmer commodity prices, and positive risk sentiment.
US Durable Goods Orders and Pending Home Sales are ahead.
Today’s Suggested Range USD/CAD: 1.2840 – 1.2940