Canadian Dollar Update, October 13, 2021 – Canadian dollar rally continues
USD/CAD Open: 1.2447-51, Overnight Range: 1.2437-1.2477, Previous Close: 1.2467
WTI Oil is at $80.51 and gold is at $1,795.60. US markets are mixed today.
For today, USD resistance is at 1.2464. Support is at 1.2420.
• FOMC minutes and US inflation data on tap
• UK GDP rebounds, but misses forecast
• GBP outperforms as US dollar opens defensively
The Canadian dollar continued to rally overnight, albeit at a much slower pace. USDCAD dropped from 1.2477 to 1.2437, where it is trading in Toronto. Canadian dollar gains continue to be fueled by high oil prices and recent data suggesting that the Bank of Canada will normalize monetary policy sooner than expected.
China’s trade surplus widened to $66.76 billion, powered by a 28.2% y/y rise in exports. However, imports only rose 17.6% compared to August’s 33.1% increase. The results helped China’s Shenzhen CSI 300 index record a 1.15% gain, even as the other major Asia indexes posted losses.
Traders are cautious ahead of September US CPI data. The consensus estimate for Headline CPI and Core CPI is unchanged from August at 5.3% y/y and 4.0%, respectively. However, some analysts warn that the risk is for an above-consensus result. If so, US dollar losses will be recovered quickly.
The minutes from the September 22 FOMC meeting are released at 2:00 pm ET. Traders will be looking for further insight to reinforce their view that the Committee turned hawkish and plan to begin tapering asset purchases in November.
EURUSD climbed from an overnight low of 1.1530 to 1.1566 where it is trading in NY due to pre-CPI position adjusting and a dip in US Treasury yields. However, gains may be limited as ECB officials insist that inflation is transitory and that monetary policy needs to remain accommodative. The intraday EURUSD technicals are bullish but need to break above 1.3680 or risk retreating to 1.3550.
GBPUSD rallied to 1.3643 from 1.3577. August GDP rose 0.4% m/m, which was a tick below the 0.5% m/m expected. Some analysts suggest that the data is indicative of an economy that is more sluggish than the Bank of England anticipated, which removes pressure for a near-term rate hike.
GBPUSD traders are also cautious as EU/UK post-Brexit tensions flare over Northern Ireland border checks and the UK/France fishing dispute.
USDJPY broke above 112.00 on Monday and hasn’t looked back. Prices are trading at 113.54, a level last seen in December 2018. The move was sparked by the steep rise US Treasury yields, with the 10-year climbing from 1.46% on October 3 to 1.625% yesterday. Prices dipped to 1.568% today, but USDJPY traders have ignored it-so far.
The Canadian data calendar is empty.
Today’s Suggested Range USD/CAD: 1.2400 – 1.2500