Canadian Dollar Update, May 22, 2020 – Canadian Dollar rally becomes rout
USD/CAD Open: 1.4021-25, Overnight Range: 1.3941-1.4048
WTI Oil is at $32.69 and gold is at $1,736.30. US markets are lower today.
For today, USD resistance is at 1.4078. Support is at 1.3992.
• WTI oil prices tumble 5.5% overnight, still up 8% since last Friday
• US dollar opening with gains but will still finish with losses for the week
The Canadian dollar rally early yesterday morning, quickly turned into a rout, under a wave of risk aversion. China announced plans for a new National Security Law, aimed at Hong Kong, which many fear will significantly reduce Hong Kong’s autonomy. President Trump promised that “if it happens, we will address that issue very strongly.” The Hong Kong news added another layer of tension in USD/China relations.
China also spooked markets when they opted against providing a 2020 GDP growth forecast, due to disruptions from the pandemic. The news raised fears that the global economic recovery may be in jeopardy.
The stampede to buy US dollars crushed a Canadian dollar rally that was threatening to accelerate. USDCAD dropped from 1.4074 at Monday’s New York open to a low of 1.3867 yesterday.
When the risk sentiment turned negative, USDCAD soared. The rally continued overnight, fueled by stop-loss buy on the move above 1.3960, which took prices to 1.4034. They drifted down to 1.4005 in early Toronto trading, ahead of today’s release of Canadian Retail Sales data for March, which is expected to decline 10%. No one will be surprised as COVID-19 lockdown measures had led to closures of most retail outlets.
GBPUSD is under pressure after rallying from 1.2072 on Monday to 1.2287 yesterday. Prices have retreated to 1.2177 in early Toronto trading. The China news weighed on prices as did weak UK data and bearish comments from Bank of England Deputy Governor, Dave Ramsden. The UK announced a record budget deficit and a 22.6% drop in Retail Sales for April. Mr. Ramsden echoed comments from other BoE officials and warned of a possible increase in QE at the June meeting. He also did not rule out the possibility of negative interest rates.
EURUSD dropped as intraday technicals flipped to bearish from bullish, on the back of widespread US dollar demand. AUDUSD and NZDUSD were in the same boat and followed EURUSD lower.
There are not any US economic reports today, and trading will dry up this afternoon as Americans try to get a jump on their long weekend. Monday is Memorial Day in the US.
Today’s Suggested Range USD/CAD: 1.3970– 1.4070