Canadian Dollar Update, November 26, 2021 – Canadian dollar plunges
USD/CAD Open: 1.2758-62, Overnight Range: 1.2650-1.2772, Previous Close: 1.2648
WTI Oil is at $68.17 and gold is at $1,792.30. US markets are lower today.
For today, USD resistance is at 1.2830. Support is at 1.2729.
- COVID-19 variant Nu roils global markets
- Global equity markets in free-fall, oil prices plunge
- CAD underperforms as JPY and CHF soar
Black Friday sales included Canadian, Australian, and New Zealand dollars. The traditional post-US Thanksgiving shopping day kicks off the holiday season and many retailers offer large discounts. This year’s version included panicked selling of commodity currencies and safe-haven demand for Japanese yen and Swiss francs.
The currency sell-off was sparked by reports of a nasty, highly transmittable COVID-19 variant from South Africa, blew up the Twitter-verse, and roiled global financial markets.
The variant, officially denoted as B.1.1.529 triggered an emergency meeting of the World Health Organization (WHO) today, even though it has only been tracked for the last three days. Already governments have imposed new travel restrictions, including restricting flights from South Africa.
The travel restrictions sent crude oil prices tumbling. West Texas Intermediate (WTI) plunged 6.2%, falling from $78.14 to $72.64 overnight on renewed fears of reduced demand even as China, UK, South Korea, Japan, and the US release oil from Strategic Petroleum Reserves.
The Canadian dollar plunged alongside falling crude prices and is the worst-performing major G-10 currency overnight. USDCAD climbed to 1.2772 from 1.2644 before retreating to 1.2645 in early Toronto trading today.
The variant news sent US Treasury yields into free-fall. The 10-year yield fell to 1.53% from 1.656% yesterday as traders reassessed their Fed rate hike expectation. Interest rate increases that were expected as early as May 2022 were pushed back until September.
The drop in Treasury yields gave the beleaguered EURUSD some much-needed support. EURUSD climbed to 1.1294 from 112.08 as ECB, and Fed interest rate differentials narrowed. However, gains may be capped as the Eurozone is already suffering from renewed COVID-19 outbreaks, and the Nu variant won’t help.
GBPUSD rallied to 1.3338 from 1.3295 along with the rising EURUSD, due to US dollar selling on the back of lower Treasury yields. However, fears that the Nu variant will manifest in the UK, and a plunge in the FTSE 100 index is limiting gains.
The Japanese yen is the best performing G-10 currency overnight, rising 1.2%, as safe-haven demand and the drop in Treasury yields knocked USDJPY down to 113.66 from 115.36.
AUDUSD and NZDUSD dropped in concert with weaker commodity prices. AUDUSD suffered added pressure as Westpac bank dropped its AUDUSD June 2022 forecast to 0.7000 from 0.7700.
There are no US or Canadian economic reports today.
Today’s Suggested Range USD/CAD: 1.2700 – 1.2800