Canadian Dollar Update, June 5, 2020 – Canadian Dollar looking for a top
USD/CAD Open: 1.3486-90, Overnight Range: 1.3391-1.3513
WTI Oil is at $38.78 and gold is at $1,684.20. US markets are higher today.
For today, USD resistance is at 1.3547. Support is at 1.3337.
• Canadian dollar rises in early Toronto trading
• Positive global risk sentiment driving US dollar lower
• Oil production cut extensions expected
The Canadian dollar was in demand when Toronto FX traders started their day. It was not alone. Global risk sentiment got an added boost yesterday, thanks to the European Central Bank (ECB).
The ECB stepped up to the plate yesterday and delivered what the market expected – a healthy bump in the Pandemic Emergency Purchase Program (PEPP). The program was increased by €600 billion to $1.350 trillion. That news comes on the heels of Germany’s €130 stimulus program announced Thursday and the proposal for an EU €725 billion COVID-19 Relief Fund. The new money and the quickly disappearing lockdown restrictions raised positive risk sentiment in Europe and around the globe. The ECB meeting results overshadowed today’s weak German factory orders report.
EURUSD climbed from yesterday’s 1.1195 low to 1.1383 overnight, leaving only downtrend line resistance at 1.1370, guarding a potential test of 1.2105. The EURUSD rally sparked similar moves in the rest of the G-10 currencies due to the improved outlook for global growth. However, the magnitude and steepness of the recent rally, suggests a correction is overdue.
GBPUSD traders do not appear overly concerned that the latest round of EU/UK trade talks is poised to end without any agreement. Negotiators have until June 30 to come up with a framework of a deal that would allow both governments to extend the hard-Brexit deadline beyond December 31, 2020.
The Canadian dollar has underperformed against the Antipodean currencies. AUDUSD has surpassed its pre-COVID-19 peak and is trading near December year-end levels. NZDUSD is less robust, but it has retraced all its COVID-19 losses. However, USDCAD is still above the pre-pandemic lows. That underperformance has a lot to do with the slowdown of Canada’s oil industry, which will hamper recovery.
The intraday USDCAD technicals are bearish.
The US nonfarm payrolls (NFP) results will overshadow today’s Canadian employment report. NFP forecasts are all over the map. Weaker than expected NFP may spark a profit taking rebound in the US dollar, which would boost USDCAD in the process.
Today’s suggested range is: 1.3430-1.3530