Canadian Dollar Update, October 1, 2021 – Canadian dollar sentiment improves
USD/CAD Open: 1.2675-76, Overnight Range: 1.2627-1.2738, Previous Close: 1.2675
WTI Oil is at USD$75.64 and gold is at USD$1,758.50. US markets are higher today.
For today, USD resistance is at 1.2652. Support is at 1.2617.
• S&P 500 futures rebound improving risk sentiment
• Canada July GDP expected to shrink 0.2% m/m
• Higher oil price outlook supports Canadian dollar
The Canadian dollar had a volatile 24-hour in a move fueled by month-end portfolio rebalancing flows and plunging US stock markets. USDCAD plummeted from the Asia peak of 1.2760 yesterday to 1.2629 just before lunch, rallied to 1.2737 overnight and gave back almost all the gains in early NY trading today.
Global risk sentiment took a turn for the better at the start of trading in NY. S&P 500 fell from 4307.54 at yesterday’s close to 4273.72 overnight then rallied hard in NY reaching 4328. Those gains improved risk sentiment and USDCAD dropped from its opening level of 1.2700 to 1.2655.
Canada July GDP (forecast -0.2%m/m) may put a cap on Canadian dollar gains if it is weaker than expected. A soft report may force the Bank of Canada to downgrade near-term growth prospects. On the other hand, better than expected data coupled with firm oil prices may accelerate Canadian dollar gains.
West Texas Intermediate (WTI) oil prices are steady with intraday uptrend support at $73.60/barrel guarding the August uptrend line which is at $71.40/b. The prospect of rising global demand is expected to more than offset the latest 400,000 barrel /day increase from Opec. Chinese authorities managed to give prices additional support when they instructed state-owned energy prices to “secure supplies for winter at any cost.”
EURUSD traded in a 1.1564-1.1590 range overnight and continued to consolidate losses since breaking 1.1660 support on Wednesday. The single currency is suffering from widening yield differentials between the Eurozone and the US and from slightly weaker than expected Manufacturing PMI data (actual 58.6 vs forecast 58.7).
Eurozone inflation jumped to 3.4% y/y in September compared to 3.0% y/y in august. That gain was blamed on soaring energy costs. EURUSD technicals are bearish below 1.1600 with a break below 1.1540 targeting 1.1450.
GBPUSD soared from the overnight low of 1.3435 to 1.3524 in early NY trading. Profit-taking and a rebound in stock markets boosted prices. UK September Manufacturing PMI was a 57.1 with the result due to supply chain issues. GBPUSD technicals are bullish and looking for a break above 1.3550 to extend gains to 1.3600.
USDJPY retreated from 111.48 to 111.04 on lower 10-year Treasury yields and renewed US dollar weakness. The BOJ Tankan Survey was largely better than expected. The Large Manufacturers Index rose to its highest since 2018.
AUDUSD and NZDUSD are at the top of their overnight ranges as equities rally and risk sentiment improves.
Today’s US data includes Personal Income and Expenditures (PCE), ISM Manufacturing PMI, Construction spending, and Michigan consumer confidence.
Today’s Suggested Range USD/CAD: 1.2600 – 1.2700