Canadian Dollar Update, May 10, 2021 – Canadian Dollar Nears 4-year Peak
USD/CAD Open: 1.2119-24, Overnight Range: 1.2096-1.2131, Previous Close: 1.2131
WTI Oil is at $65.46 and gold is at $1,835.00. US markets are lower today.
For today, USD resistance is at 1.2108. Support is at 1.2081.
• Canadian dollar rallies despite weak jobs report
• GBPUSD surges after Scottish election
• US dollar opens with gains after cautious overnight session
The Canadian dollar screeched higher Friday after the US and Canadian employment reports were far weaker than expected. The move is counter-intuitive, as rising job losses signal a faltering economy. But that was then, and this is now.
On Friday, analysts were expecting the US nonfarm payrolls report to show a gain of around one million new jobs. It didn’t happen. Nonfarm payrolls rose 266,000 compared to expectations for a 978,000 increase.
At least America added jobs in April. Canada didn’t. Statistics Canada said 207,000 jobs disappeared. A poor report was expected due to the latest round of COVID-19 lockdowns and restrictions in many regions.
The weak Canadian data was totally ignored. Instead, traders focused on the US report, which suggested the American economy was not in any danger of overheating. Perhaps Fed Chair Jerome Powell and colleagues are correct to leave monetary policy unchanged for the foreseeable futures.
The employment data drove the US dollar lower against the major G-10 currencies, boosted commodity prices and sank US Treasury yields. USDCAD fell from 1.2190 before Friday’s US and Canadian employment reports, closed at 1.2131, then extended losses to 1.2096 overnight.
The risk-on bias continued in Asia to start the week. The US dollar extended its slide vs the majors, although equity markets did not stray too far from home. European bourses followed Asia’s lead and are trading close to flat. Wall Street may open with minor gains.
Oil prices rallied after the largest refined products pipeline in the US was shut down because of a ransomware attack. The gains should be temporary. West Texas Intermediate (WTI), the North American benchmark price, is trading $65.46/barrel, supporting Canadian dollar gains.
The Canadian dollar is in demand. Analysts are forecasting a massive domestic economic driven by even higher commodity prices, domestic consumer demand, and widening Canadian and US interest spreads in favour of Canada. The domestic currency will get an added boost from spillover effects from US stimulus spending.
GBPUSD blasted through resistance at 1.4010 after elections in Scotland. The Scottish National party fell one seat short of a majority, which reduced the risk of another Scottish independence referendum. GBPUSD sentiment is bullish above 1.3975, looking for a move to 1.4250.
EURUSD is consolidating post-NFP gains in a 1.2138-1.2176 range. ECB Chief Economist Philip Lane suggested the ECB will discuss tapering at the June meeting: ”We can increase or decrease our purchases depending on what is necessary to keep financing conditions favourable”.
AUDUSD and NZDUSD rallied due to the broad US dollar weakness, with AUDUSD getting an added boost from steady to firm economic data.
There are not any notable economic reports available today.
Today’s Suggested Range USD/CAD: 1.2070 – 1.2170