Canadian Dollar Update, March 31, 2021 – Canadian Dollar on the Defensive
USD/CAD Open: 1.2597-01, Overnight Range: 1.2595-1.2629, Previous Close: 1.2629
WTI Oil is at $60.88 and gold is at $1,708.10. US markets are higher today.
For today, USD resistance is at 1.2600. Support is at 1.2544.
• Traders await Biden’s “Build Back Better” stimulus details
• ECB officials continue to fret about “uncertainties”
• US dollar opens mixed to lower
The Canadian dollar is on the defensive after snapping the year-long downtrend line at 1.2610. However, follow-through selling pressures ran into heavy month-end and quarter-end demand for Canadian dollars. The S&P 500 has gained 3.7% month-to-date which suggests some portfolio managers will need to buy Canadian dollars to adjust their portfolios to their benchmarks.
FX markets are cautious ahead of President Biden’s latest stimulus plan called “Build Back Better.” The plan reportedly spends $2.0 -$4.0 trillion on infrastructure, while raising $3.0 trillion in new corporate taxes and taxes on wealthy individuals. The details will be unveiled today at 4:20 pm ET.
EURUSD dropped to 1.1705 from 1.1747 due to widening US and EU interest rate differentials and dovish comments from ECB President Christine Lagarde. She continued to stress the uncertainties to the economic outlook and said it would be “quite some time” before they would consider raising rates. Euro zone CPI rose 0.9% m/m in March. EURUSD is trading with a negative bias looking for a break of 1.1700 to extend losses to 1.1650.
GBPUSD rallied from 1.3718-1.3794 due to slightly better than expected economic data, positive comments from Bank of England officials recently, and GBP demand due to month-end and quarter-end rebalancing flows. The short-term technicals are bullish above 1.3720 looking for a break of 1.3850 to extend gains to 1.4000.
USDJPY traded to 110.954 from 110.28 with Japanese year-end flows and steady to firm Treasury yields underpinning prices.
AUDUSD eked out a small gain due to broad US dollar weakness and better than expected Building Permits data. NZDUSD inched higher as well. Robust China PMI data underpinned both currency pairs.
USDCAD continued to consolidate recent gains in a 1.2595-1.2629 range, with month-end US dollar selling pressures helping to cap the topside. The currency pair’s direction continues to be dictated by broad US dollar sentiment. However, the prospect of an increased number of people vaccinated, the outlook for higher oil prices, and spill-over effects from the latest US stimulus plan may slow USDCAD gains.
Today’s Canadian data includes January GDP (forecast 0.5% m/m), Industrial Product Price and Raw Material Price. The US releases Chicago PMI (forecast 60.7) and pending home sales.
Today’s Suggested Range USD/CAD: 1.2540 – 1.2640