Canadian Dollar Update, March 29, 2021 – Canadian Dollar Steady, to Start Holiday-Shortened Week
USD/CAD Open: 1.2593-97, Overnight Range: 1.2571-1.2625, Previous Close: 1.2578
WTI Oil is at $61.42 and gold is at $1,708.70. US markets are mixed today.
For today, USD resistance is at 1.2611. Support is at 1.2572.
• On-again, off again, equity risk sentiment
• Month-end, quarter-end, and Easter holidays ahead
• US dollar opens with a mixed flavour
The Canadian dollar had a topsy-turvy overnight session. The currency sank in Asia, then rallied in Europe and managed to regain Friday’s closing level in early NY trading.
There were not any economic reports of note, leaving traders to seek FX direction elsewhere. They found it in the equity market. Stock traders were leery about a significant market melt-down following news that a US hedge-fund with massive equity positions could not meet margin calls from financial institutions. Archegos Capital was forced to liquidate a reported $20 billion in holdings on Friday, and traders were concerned about additional selling today. Traders were also concerned about the losses incurred by banks that provided Archegos Capital with leverage.
Deutsche Bank is reportedly down $2.0 billion.
Asia equity markets recovered opening losses and closed on a mixed note.
The major European equity indexes are higher, and Wall Street is poised to open around flat.
It is a short week, and it will be an interesting week. Wednesday is month-end, quarter-end, and for Japanese companies, year-end. Portfolio rebalancing flows may distort FX markets.
The monthly nonfarm payrolls are released Friday. The forecast is for a massive gain, as high as 750,000. The FX reaction following the news may be volatile as it is Good Friday, a market holiday in Canada, Europe, the UK, and many other regions. But not in the US.
The Canadian dollar continues to benefit from firm oil prices and forecast for even higher prices in the coming months due to expectations for a robust, post-pandemic economic boom. West Texas Intermediate, the North American benchmark price, climbed to $61.74 from $59.45/barrel in Asia. Some of those gains are due to expected delays in crude shipments from the middle east due to a container ship completely blocking the Suez Canal.
EURUSD is still on the defensive due to divergent monetary policies between the ECB and the Fed. Analysts expect the FOMC will be forced to raise interest rates ahead of schedule due to rising inflation, despite the Fed’s assertion to the contrary. Analysts do not have the same concern with the ECB. They believe the ECB is likely to ease monetary policy further due to the impact of the third-wave of the pandemic.
FX traders will be looking to equity and bond markets for direction as the economic data cupboard is bare.
Today’s Suggested Range USD/CAD: 1.2550 – 1.2650