Canadian Dollar Update, June 7, 2021 – Canadian Dollar Ignores Weak Domestic Jobs Data
USD/CAD Open: 1.2083-87, Overnight Range: 1.2075-1.2105, Previous Close: 1.2080
WTI Oil is at $69.23 and gold is at $1,902.50. US markets are mixed today.
For today, USD resistance is at 1.2104. Support is at 1.2051.
• Canadian employment report expected to be weak
• Analysts suggest there is upside risk to today’s NFP data
• US dollar opens higher, adding to Thursday’s gains
The Canadian dollar continues to chop around in a well-defined 1.2000-1.2140 range. The upside momentum in April ran out of gas in May because traders believed all the positive news was priced into the currency.
Nevertheless, the positive news continues to fuel expectations for further Canadian dollar gains. Canada’s second-dose vaccine roll-out is getting traction which reinforces calls for a robust second half economic boom.
The Canadian dollar is getting additional support from rising commodity prices. West Texas Intermediate (WTI) oil, the North American benchmark prices, came within 3 cents of $70.00 overnight, rising to $69.87/barrel. Oil traders expect further gains due to OPEC and International Energy Agency (IEA) predictions that crude demand will far outstrip supply in the second half of 2021.
Perhaps the biggest driver of Canadian dollar gains is the Bank of Canada’s mildly hawkish interest rate outlook. This contrasts with the Fed’s view that weak employment means US rates will remain unchanged for a considerable period.
The Canadian dollar uptrend resumed after Fed officials successfully pushed back against concerns that rising inflation would force them to raise interest rates sooner than expected. Friday’s weaker than expected US nonfarm payrolls data showed the US economy was growing but not in any danger of overheating, which may have forced the Fed’s hand. US 10-year Treasury yields dropped from a pre-NFP peak of 1.62% to 1.58% in early NY trading.
Treasury Secretary Janet Yellen told Bloomberg News that even if interest rates rose, it wouldn’t be a bad thing. She said “We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade. We want them to go back to ”a normal interest rate environment,“ and if this helps a little bit to alleviate things then that’s not a bad thing — that’s a good thing.”
There are no US or Canadian economic reports today, leaving the Canadian dollar direction determined by US dollar and equity moves.
Today’s Suggested Range USD/CAD: 1.2040 – 1.2140