Canadian Dollar Update, November 18, 2021 – Canadian dollar suffering from oil blues
USD/CAD Open: 1.2598-02, Overnight Range: 1.2595-1.2622, Previous Close: 1.2611
WTI Oil is at $78.74 and gold is at $1,862.30. US markets are mixed today.
For today, USD resistance is at 1.2656. Support is at 1.2553.
- Soft crude prices sink Canadian dollar
- Turkey central bank slashes rates 1.0%
- US dollar softer against G-10 majors, except CAD
The Canadian dollar got spanked yesterday. Traders were unhappy about plunging oil prices and disappointed that Canadian inflation failed to rise higher than forecast. USDCAD rallied from 1.2548 just ahead of the CPI release to 1.2620 by late afternoon.
Canada CPI rose 4.7%, while Core CPI rose 3.8% y/y compared to forecasts for a 3.5% rise. Perplexingly, the Bank of Canada’s preferred measures of Core CPI, trim, medium, and common, didn’t show any change. That result is certainly not what Canadian consumers are experiencing.
The Canadian dollar plunge was more a factor of oil prices than Canadian economic data. West Texas Intermediate (WTI) dropped over 9.0% since November 9, falling from $84.77/barrel to $77.11/b overnight. Oil traders started selling after forecasts from Opec and the International Energy Agency (IEA) predicted that the oil market will be over-supplied in the coming months. The news came as Chinese and American officials were discussing releasing crude from Strategic Petroleum reserves.
WTI oil prices have rallied since August and the current uptrend is intact while prices are above $70.00/barrel.
EURUSD bounced from 1.1315 to 1.1349 on the back of profit-taking after falling sharply this week. However, the gains are merely a correction as the single currency will continue to suffer from the belief that ECB monetary policy tightening will significantly lag the Fed and other central banks. EURUSD gains may also be capped due to renewed coronavirus concerns. Germany is expected to announce new restrictions today.
GBPUSD managed to snap a short-term downtrend when prices moved above 1.3440 yesterday. The gains were due to a thawing of Brexit tensions as the EU and UK announced progress on some Northern Ireland border issues.
USDJPY bounced off of resistance at 1.1500 yesterday and consolidated in a 113.89-114.26 range, coinciding with the US 10-year Treasury yield dropping from 1.646% to 1.58% overnight. The Japanese government announced a larger than expected $488.0 billion stimulus program to combat the impact of the coronavirus.
NZDUSD surged to 0.7051 from 0.6997 after Reserve Bank of New Zealand Q4 expectations rose 2.90% q/q, much higher than expected. Analysts immediately amended interest rate forecasts to reflect more aggressive rate hikes in 2022. AUDUSD drifted higher but underperformed its Kiwi cousin.
US weekly jobless claims and Philadelphia Fed Manufacturing data are ahead.
Today’s Suggested Range USD/CAD: 1.2550 – 1.2650