Canadian Dollar Update, October 16, 2020 – Canadian Dollar consolidating losses
USD/CAD Open: 1.3219-23, Overnight Range: 1.3177-1.3237
WTI Oil is at $40.88 and gold is at $1,903.90. US markets are higher today.
For today, USD resistance is at 1.3227. Support is at 1.3167.
• US stimulus hopes limit US dollar gains
• GBPUSD nervous as Brexit talks go into overtime
• Second-wave coronavirus pandemic fears fan flames of risk aversion
The Canadian dollar is poised to end the week on a negative note. US political drama, and a surge in positive COVID-19 tests in Canada, the UK, and parts of Europe, gave rise to safe-haven demand for US dollars. USDCAD traded in a 1.3201-1.3236 range overnight, after starting the week at 1.3100 and peaking at 1.3258 yesterday. The move was entirely due to broad US dollar demand.
FX traders are watching US election news carefully. President Trump is behind challenger Joe Biden, in almost every poll. Despite that, markets are skeptical due to the inaccuracy of the polls in the 2016 election. Hillary Clinton was a “sure-thing” before she became a footnote in history.
The concern is another global economic slump if the current wave of COVID-19 cases becomes a new pandemic. Europe and the UK are reporting a surge in coronavirus cases. Canada is not immune. There are 191,730 cases in the country, with 2,345 positive tests reported yesterday. The US reported over 60,000 new cases yesterday.
Coronavirus aside, European and UK traders are extremely nervous around the Brexit negotiations. Prime Minister Boris Johnson threatened to scrap the talks if a deal wasn’t reached by Thursday, but then he extended the deadline until today. Traders expect the deadline will be extended again. Mr. Johnson may not agree. He told reporters that it looked like the UK was heading for “the Australian solution,” and said “What we’re saying to them is come here, come to us, if there’s some fundamental change of approach.”
FX markets were steady, and rangebound overnight. EURUSD consolidated recent losses in a 1.1695-1.1739 range, and prices are in the middle of that band in Toronto trading. GBPUSD is trading similarly, after trading in an overnight range of 1.2860-1.2960.
AUDUSD and NZDUSD are trading above their worst levels for the week.
Sentiment for both currency pairs is bearish due to RBA and RBNZ officials talking about negative interest rates, and expanded quantitative easing plans.
US Retail sales is expected to have risen 0.7% y/y in September.
Canada August Manufacturing Sales data is forecast to fall 1.4% m/m
Today’s Suggested Range USD/CAD: 1.3170 – 1.3270