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Canadian Dollar Update May 30, 2019 – Canadian dollar undermined by dovish BoC

USD/CAD Open: 1.3493-1.3494 Overnight Range: 1.3487-1.3525

The Canadian dollar was rangebound in overnight currency exchange markets. Oil is at $58.99 and gold is at $1,286. US markets are higher. United States GDP and Personal Consumption data is scheduled to be released today.

The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3516. Support is at 1.3471.

The Canadian dollar drifted higher in a subdued overnight session but remains within shouting distance of yesterday’s low. The Canadian dollar plunged after the Bank of Canada delivered a somewhat dovish policy statement that suggested Canadian interest rates would stay unchanged for quite some time. USDCAD was trading at 1.3486 before the announcement and then 1.3544 immediately afterwards. That move broke above a major resistance zone in the 1.3520-30 area which opened the door to further gains to 1.3700 (72.0 US cents/CAD dollar). However, the gains were not sustained, and prices retreated.

The Bank of Canada left interest rates unchanged for the seventh consecutive meeting, which was not a surprise. The surprise came when they said trade restrictions that were introduced by China were having a direct effect on Canadian exports. Analysts concluded that the BoC would be sidelined for as long as the US/China trade war raged.

Traders are hoping for additional insight into the BoC’s outlook today when Senior Deputy Governor Carolyn Wilkins discusses the Economic Progress Report.

The US dollar opened in Toronto with a small bias to unwind some safe-haven trades. The Swiss Franc and Japanese Yen are modestly lower compared to yesterday’s close while the other G-10 major currency pairs have eked out small gains.

In Asia, AUDUSD got a bit of a boost despite April building permits data coming in below forecast (actual -4.7 % vs forecast 0.9%). A slight unwind of safe-haven trades supported the rally. USDJPY traded higher on the back of firmer US Treasury yields.

European FX markets were extra-quiet overnight as many markets were closed for Ascension Day holidays, and consequently, there wasn’t any top tier data available. UK markets were open. GBPUSD traded quietly in a narrow 1.2612-1.2639 range. Sentiment is bearish due to the risk of a “no-deal” Brexit, which gets higher if Boris Johnson wins the race to replace Theresa May.

Oil prices have undermined the Canadian dollar. West Texas Intermediate is trading erratically and with a negative bias. Traders concerns about slowing global growth due to the US/China trade war is outweighing the risk of shortages from OPEC production cuts. However, the American Petroleum Institute said US crude inventories fell 5.3 million barrels last week which underpinned prices overnight. Traders are looking for confirmation of that decline when the Energy Information Administration (EIA) releases their weekly oil stocks report today.

Traders are awaiting today’s numerous US data releases. Q1 (preliminary) GDP, jobless claims, wholesale inventories, Pending Home Sales, and PCE data are on tap.

Today’s Suggested Range USD/CAD: 1.3450 – 1.3550

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By KBFX | May 30, 2019 | Daily Update | 0 comments

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