Canadian Dollar Update, March 18, 2022 – Canadian Dollar Grinding Out Gains
USD/CAD Open: 1.2618-22, Overnight Range: 1.2597-1.2634, Previous Close: 1.2629
WTI Oil is at $104.62 and gold is at $1,927.80. US markets are higher today.
For today, USD resistance is at 1.2642. Support is at 1.2578.
- Canada January Retail Sales expected to have rebounded
- Biden and China’s Jinping phone call scheduled today
- Commodity currencies grind out gains
The Canadian dollar squeezed out additional gains in a relatively uneventful overnight session alongside demand for the other commodity currencies.
USDCAD with an offered tone overnight due to an improved risk tone underpinning commodity prices. A surge in WTI oil prices from Wednesday’s $95.30/barrel low to $106.22/b also weighed on the prices, which has led to a test of the overnight low in early NY trading.
Two days ago, the International Energy Agency (IEA) stoked fears of an oil supply crisis. They said that global oil supplies would lose 3.0 million b/day from Russia sanctions, and since Opec is unwilling to make up the shortfall, it would cause the largest supply crisis since the 1970’s Arab Oil Embargo.
USDCAD climbed to 1.2865 in the aftermath of the somewhat surprising FOMC meeting on Wednesday but has declined steadily since, putting major support in the 1.2550-1.2580 zone in play. The slide is due to a mix of higher commodity prices and hopes for a peaceful resolution in Ukraine.
Traders may also believe that the worst is over for US interest rates. The FOMC Summary of Economic Projections forecasts six additional rate hikes in 2022 and four more in 2023, which removes a lot of uncertainty from markets. The market reaction is a bit of “buy the rumour, sell the news.”
Canadian Retail Sales are expected to rise 2.4% m/m in January, the same as the Stats Canada estimate in the December report. The improvement is due to the reopening of the economy.
The Bank of Japan monetary policy meeting was the highlight of the Asia session, but it wasn’t much of a show.
The BoJ left rates unchanged as widely expected but warned monetary policy could ease further as the economic risks were tilted to the downside. USDJPY rallied from 118.48 to 119.12, underpinned by steady to firm US Treasury yields.
US President Joe Biden and China President Xi Jinping have a scheduled phone call. The US is reportedly concerned about China’s tacit support for Russia’s invasion of Ukraine.
EURUSD dropped from 1.1118 to 1.1032 in NY largely due to profit-taking after this week’s gains and a reluctance to hold positions over the weekend.
GBPUSD retreated to 1.3123 from 1.3182. The Bank of England’s dovish rate hike put the brakes on this week’s rally with 1.3200 capping gains for the second week.
Today’s US economic data will not be a factor for traders.
Today’s Suggested Range USD/CAD: 1.2570 – 1.2670