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Canadian Dollar Update May 10, 2019

USD/CAD Open: 1.3399-1.3400      Overnight Range:     1.3380-1.3487

The Canadian dollar was rangebound in overnight currency exchange markets.  Oil is at $61.67 and gold is at $1,287.  US markets are lower. There are no releases scheduled for today’s session.

The short-term USD/CAD technicals are neutral-bearish.  For today, USD resistance is at 1.3411.  Support is at 1.3354.

Canadian dollar traders are awaiting this morning’s release of the Canadian employment report details for April. The January and February job gains were stellar as Canadian added 122,700 during those two months. The March results saw some payback with a loss of 7,200 jobs recorded. Analysts are forecasting that today’s results will show a gain of 10,000 jobs in April. If so, the report will be quickly forgotten as it won’t change the interest rate outlook, in either direction.

Instead, FX traders will be watching for news on the ongoing U.S. and China trade talks. President Trump’s promise to raise tariffs from 10% to 25% on $200 billion of Chinese goods became a reality at one minute after midnight today. The FX market reaction was underwhelming.

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NZD/USD rallied ahead of the deadline and then gave back some of the gains in European trading. AUD/USD traded in a similar fashion.

The Canadian dollar followed suit, posting gains in Asia and then consolidating those gains during the European session. However, the price action was well-within this week’s trading range suggesting the move was due to profit taking and position adjusting ahead of the weekend.

China’s Shanghai Shenzhen CSI 300 equity market index soared even as the U.S. tariffs went live. The index rose 3.63% as Chinese investors appeared to thumb their noses at Trump. The rally reportedly got a helping hand from “official” buying by Chinese state entities. China promised to retaliate against the higher tariffs with measures of its own.

The Canadian dollar got a modicum of support from the rebound in oil prices. West Texas Intermediate (WTI) climbed from yesterday’s $61.08 U.S./barrel bottom to touch $62.46/b during the European session. Heightened tensions between the U.S. and Iran fueled the move. The Vice-Admiral of the US 5th fleet warned that he wasn’t against sending the USS Abraham Lincoln carrier group through the Strait of Hormuz, which is right on Iran’s doorstep in response to new threats from Iran. To underscore his point, a flight of B-52 bombers landed in nearby Qatar.

The ongoing U.S./China trade talks may overshadow today’s U.S. inflation data release. Consumer Price Index is forecast to rise 2.1% y/y, in April, a tad higher than March’s 1.9% result. Core CPI is forecast at 2.1% compared to 2.0% previously. The gains are expected to be caused by higher gasoline prices. The U.S. dollar may be more vulnerable to a lower than expected result as it would reopen the rate cut debate.

Today’s Suggested Range USD/CAD: 1.3350 – 1.3450


Rahim Madhavji | Knightsbridge Foreign Exchange | Toll-Free: 1-877-355-5239

Knightsbridge Foreign Exchange has based the opinions expressed herein on information generally available to the public. Knightsbridge Foreign Exchange makes no warranty concerning the accuracy of this information and specifically disclaims any liability for trading decisions based on the opinions expressed and information contained herein. Such information and opinions are for general information only and are not intended to present advice with respect to matters reviewed and commented upon.

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By KBFX | May 10, 2019 | Daily Update | 0 comments