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Canadian Dollar Update, May 7, 2020 – Canadian Dollar higher after choppy overnight session

USD/CAD Open: 1.4075-79, Overnight Range: 1.4016-1.4173

WTI Oil is at $25.64 and gold is at $1,699.70. US markets are higher today.

For today, USD resistance is at 1.4112. Support is at 1.3956.

• Canadian dollar recovers from Asia plunge
• Bank of England leaves rates and QE unchanged
• Better than expected China Exports data improves risk sentiment

The Canadian dollar had a wild twenty-four hours, but despite the volatility, it opened in Toronto, virtually unchanged from where it began on Wednesday. Canadian dollar direction is driven by a mix of oil price action and broad risk sentiment.

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USDCAD extended Wednesday’s rally and climbed to 1.4171 in Asia, as markets flirted with “risk-off” sentiment.

It was not alone. AUDUSD and NZDUSD also dropped. The outlook started to change after Australia reported a stellar trade report. Australia’s trade surplus surged to a record $10.6 million, fueled by a 14% jump in exports. A few minutes later, China reported that April exports rose 3.5%, compared to forecasts for a 15.7% decline. Suddenly, everyone wanted the commodity bloc currencies and AUD, NZD, and CAD rallied steadily into the Toronto open.

Central Bankers were busy. Denmark’s Norges Bank surprised markets and cut their benchmark rate to 0% from 0.25%, due to the ongoing economic slowdown from the coronavirus. The Bank of England announced they left interest rates and quantitative easing amounts unchanged at today’s meeting, which was expected. They also issued a negative economic outlook. They predicted a 14% decline in 2020 GDP and a Q2 GDP drop of 25%. GBPUSD drifted lower in Asia, rallied into and during the BoE meeting, reaching 1.2417, and then retreated to 1.2350 in Toronto trading.

EURUSD traded quietly, in a 1.0780-1.0815 range. The improved risk tone following the China exports data underpinned prices, but gains were capped by weak German Industrial production, and sluggish Eurozone growth concerns.

USDJPY enjoyed steady demand thanks to the China trade data, the unwinding of some safe-haven demand trades and steady US Treasury yields.

The Canadian dollar received an added boost from the recovery in oil prices. Yesterday, WTI bottomed out at $22.60/barrel and then consolidated in a $22.60-$24.30 range. The topside level broke in Asia and prices rallied to $26.60/b by today’s Toronto open.

Optimism around rebounding China growth, combined with OPEC production cuts are supporting prices.

FX traders are cautious ahead of today’s US Initial Claims data. The forecast is for the rise in claims to slow from 3.839 million reported last Thursday, to 3.0 million today. Traders are also keeping a watch on China/US relations, which have deteriorated after Trump threatened new tariffs.

Today’s Suggested Range USD/CAD: 1.4020– 1.4120

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By KBFX | May 7, 2020 | Daily Update | 0 comments