Canadian Dollar Update, March 17, 2020 – Canadian Dollar plummets
USD/CAD Open: 1.4015, Overnight Range: 1.3960-1.4164
Oil is at $28.60 and gold is at $1,502.50. US markets are mixed today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.4170. Support is at 1.4092.
The Canadian dollar plummeted in early Toronto trading. It was not alone. A wave of US dollar panic buying washed over FX markets in the hour before Toronto opened and continued in early trading. USDCAD traded in a 1.3063-1.4015 range in Asia and more most of the European morning and then rallied to 1.4133. The Canadian dollar mirrored moves in EURUSD which plunged to 1.1001 from an overnight peak of 1.1183. Blame in on COVID-19.
The number of new confirmed coronavirus cases in Spain jumped 35% in one day. The President of France told its citizens to self-isolate. The European Union is reportedly planning to ban all non-essential travel in the Euro area. Worldwide coronavirus cases have reached 182,400 with the US reporting 4,482 people tested positive for the virus. GBPUSD tracked EURUSD lower, dropping from 1.2272 to 1.2086 in Toronto.
Global markets are in a tizzy. On Monday, the Dow Jones Industrial Average dropped 12.9%. Traders, looking for a rebound today may be disappointed as the major European indexes are lower and S&P 500 futures are flat. The coordinated central bank monetary policy initiatives which were meant to inject some calm into jitter markets, appear to have failed.
The steep drop in oil prices exacerbated Canadian dollar weakness because of Covid-19. West Texas Intermediate oil prices are trading at $28.87/barrel, which means that Canada’s main crude export, Western Canada Select, is trading at around $16.60/barrel. That price is decimating Alberta’s oil patch and shredding the Canadian Government’s finances because of the drop in royalty payments.
In Asia, AUDUSD selling because of broad US dollar demand accelerated following the release of the minutes from the Reserve Bank of Australia meeting on March 2. They showed that RBA policymakers anticipated further disruption from the COVID-19 outbreak when it cut the Overnight Cash Rate (OCR) to 0.5%. Traders expect another rate cut on Thursday. The New Zealand dollar continues to reel following yesterday’s 0.75% rate cut.
USDJPY is trading near the top of its overnight 105.91-107.18 range, in part due to weak business confidence, although Industrial Production and Capacity Utilization reports were slightly better than expected.
US Retail Sales and Canadian Manufacturing Sales reports are on tap today. They will be ignored. Instead, traders will take direction from equity market movements and headlines from the noon-hour G-7 meeting.
Today’s Suggested Range USD/CAD: 1.4000 – 1.4100