Canadian Dollar Update, March 5, 2021 – Canadian Dollar Slides
USD/CAD Open: 1.2716-20, Overnight Range: 1.2653-1.2717, Previous Close: 1.2668
WTI Oil is at $66.21 and gold is at $1,696.60. US markets are higher today.
For today, USD resistance is at 1.2685. Support is at 1.2642.
• Fed Chair Powell disappoints Bond markets
• OPEC delays production cuts, prices surged
• Canadian dollar outperforms in commodity currency bloc
Fed Chair Jerome Powell did not tell the market what it wanted to hear, and things got messy. US treasury yields climbed steadily for the past month as bond traders decided that the Biden $1.9 trillion stimulus plan would trigger a spike in inflation and force the Fed to raise interest rates in response.
Traders expected the Fed Chair to suggest some measures the Fed would implement to combat higher interest rates. He didn’t. Instead, he repeated that the Fed would maintain its easy monetary policies until they can fulfill their twin mandates of maximum employment and inflation averaging 2.0%. He said, “today, we are a long way from that goal.”
The bond market was not impressed. 10-year Treasury yields climbed to 1.52% from 1.45% before his speech. The US dollar soared against the major G-10 currencies, and the Canadian dollar suffered.
The Canadian dollar losses would have been worse if not for the surge in crude oil prices. West Texas Intermediate soared from $60.50 yesterday to $65.63 after OPEC and Russia surprised markets by delaying scheduled production cuts from April 1 to at least May 1. Saudi Arabia agreed to extend its voluntary $1.0 million barrel/day cut as well.
Canadian producers announced 500,000 barrel production cuts as well. Those cuts were not in solidarity with OPEC but for maintenance reasons.
USDCAD climbed from 1.2653 to 1.2722 in early Toronto trading supported by bullish intraday technicals. However, high oil prices and the long-term downtrend line at 1.2750 may limit gains today.
Traders are looking ahead to the US employment report. Nonfarm payrolls are expected to show an increase of 182,000 jobs in February. The impact from the data may be limited as traders focus on Treasury yields and Wall Street.
Overnight, EURUSD broke support at 1.2020 after Powell’s remarks, and the level hasn’t been seen since. The single currency traded in a 1.1916-1.1976 range overnight. Selling pressure stemmed from the unwinding of stale long EURUSD positions and bearish technicals. Widening yield differentials between US Treasuries and Bunds is also undermining the currency pair.
GBPUSD plunged from 1.3905 to 1.3793 due to widespread US dollar demand and the flushing out of stale long GBPUSD positions. The short term technicals are bearish, looking for a test of support in the 1.3720 zone.
Canada Merchandise Trade and Ivey PMI data are due today.
Today’s Suggested Range USD/CAD: 1.2620 – 1.2720