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Canadian Dollar Update June 3, 2019 – Canadian dollar tracking soft greenback

USD/CAD Open: 1.3484-1.3485 Overnight Range: 1.3483-1.3538

The Canadian dollar was rangebound in overnight currency exchange markets. Oil is at $54.35 and gold is at $1,319. US markets are mixed today. Manufacturing data in Canada and the US is scheduled to be released today.

The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3518. Support is at 1.3461.

The Canadian dollar is tracking the US dollar. The greenback is drifting lower against the G-10 major currencies in early Toronto trading, and that helped the Canadian dollar return to Thursday’s peak levels this morning. USDCAD traded at 1.3560 on Friday before the Canada March GDP report was released and prices dropped to 1.3500 by the close of trading.

The Canadian dollar rally coincided with broad US dollar selling against the major G-10 currencies, in part due to month-end portfolio rebalancing flows. Those flows were likely present today. The US dollar opened in Toronto with small losses across the board, and those losses widened in early trading.

The FX risk aversion theme was evident in May with only the Japanese yen and Swiss franc recording gains against the US dollar. The British pound was the worst performing G-10 currency due to British politics and the increased risk that Britain leaves the European Union without a deal. Rate cut fever drove AUDUSD and NZDUSD lower.

The US and China appear to be getting set for a prolonged trade war. China released a “White-Paper” on the weekend, outlining their version of the dispute. Some of their issues are 1) “Economic and trade friction provoked by the US, damages the interests of both countries and of the wider world” 2) “China’s technological innovation is based on self-reliance. Accusing China of intellectual property theft and forced technology transfer is utterly unfounded.” 3) “The Chinese and American economies are interlinked, and bilateral trade and investment are mutually beneficial” 4)” The trade war has not “made America great again” 5) “US trade bullying harms the world.” 6) “The US has backtracked on its commitments in the China-US economic and trade consultations”

The issues were not unexpected, and FX markets didn’t react.

Oil traders did. West Texas Intermediate (WTI) plunged in thin Asia market trading. WTI fell from Friday’s close of $53.37/barrel to $52.15/b, but then fully recovered those losses (and more) touching $54.37 in early Toronto trading. Prices were supported by Saudi officials suggesting that they, and OPEC, would do everything they could to stabilize prices.

The Canadian dollar continues to bask in the glow of better than expected March GDP, which rose 0.5%, well above the -0.2% level seen in February. The gain supports the Bank of Canada’s view that the weakness seen at the beginning of the year would be temporary.

FX traders will be tracking Wall Street price action as well as the US ISM Manufacturing data for May.

Today’s Suggested Range USD/CAD: 1.3430 – 1.3530

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By KBFX | June 3, 2019 | Daily Update | 0 comments

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