Canadian Dollar Update, October 14, 2020 – Canadian Dollar trades sideways
USD/CAD Open: 1.3132-36, Overnight Range: 1.3116-1.3163
WTI Oil is at $40.83 and gold is at $1,907.00. US markets are lower today.
For today, USD resistance is at 1.3181. Support is at 1.3111.
• Lack of US COVID-19 Relief bill weighs on risk sentiment
• Coronavirus outbreaks in Europe and UK underpin US dollar
• UK extending trade talk deadline
FX markets were directionless, and somewhat choppy while keeping existing ranges intact. Asia equity indexes were mixed to flat after Wall Street closed with losses. European bourses turned negative, alongside S&P 500 futures, in part due to disappointing earnings from Bank of America.
GBPUSD traders were busy. The currency closed at 1.2936 yesterday, after falling from 1.3068 on negative Brexit headlines. The downward spiral continued in Asia and in early European trading, with GBPUSD hitting 1.2865. The selling pressure was due to fears that the EU and UK would reach Boris Johnson’s deadline of October 15, without a trade agreement, leading to a “no-deal” Brexit.
Boris blinked. UK media reported that Mr. Johnson scrapped his deadline and would not walk away from talks. GBPUSD soared and touched 1.2988 in early Toronto trading.
EURUSD has been left “outside looking in” during the GBPUSD drama. The single currency traded narrowly in a 1.1720-1.1753 range. Prices are under pressure from renewed coronavirus outbreaks in various Eurozone regions. Also, dovish comments from ECB officials and weak economic data are undermining prices. Eurozone Industrial Production rose 0.7% m/m in August.
In Asia, USDJPY consolidated recent losses in a tight 105.32-105.50 range. On-going coronavirus concerns, uncertainty ahead of the US election, and the lack of a new COVID-19 relief bill in America are keeping negative risk sentiment elevated.
AUDUSD and NZDUSD outperformed the Canadian dollar again, although all three currency pairs were confined to narrow trading bands.
The Canadian dollar is a puzzle. Weak domestic economic data, ballooning federal government deficits, higher taxes, soft oil prices, and a renewed coronavirus outbreak in Quebec and parts of Ontario suggest USDCAD should be trading closer to 1.3400, rather than 1.3100. The Canadian dollar story is a US dollar story. The Loonie is trading inversely to US dollar sentiment. When the greenback is in demand, the Canadian dollar sinks, and when the greenback is being sold, the Canadian dollar rises.
Oil prices have been relatively steady around $40.00/barrel. That level is too low to give the Loonie much benefit.
There isn’t any top tier US data until Friday when Retail Sales are released. Until then, FX traders will take direction from Wall Street price action, which may be choppy as quarterly earnings reports are released.
Today’s Suggested Range USD/CAD: 1.3090 – 1.3190