Canadian Dollar Update October 17, 2019 – Canadian Dollar rides the Brexit wave
USD/CAD Open: 1.3197-1.3198 Overnight Range: 1.3146-1.3211
Oil is at $52.88 and gold is at $1,497.40. US markets are higher today.
The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3185. Support is at 1.3117.
The Canadian dollar rode the Brexit wave and is probing resistance near the 76.0 US cent level. UK Prime Minister Boris Johnson announced a “great new deal” while European Commission President Jean-Claude Juncker echoed with “a fair and balanced agreement.” GBPUSD soared on the news. Prices had dipped to 1.2751 in Asia but started drifting higher in anticipation of a Brexit breakthrough and were sitting at 1.2775 just before London traders got to work. In no time at all, rumours and leaks drove prices to 1.2873. The announcement kicked demand into overdrive and GBPUSD touched 1.2989. Profit-taking and the realization that the deal announcement still needs approval from Irish authorities, UK parliament and the EU 27 drove prices down to 1.2855 in Toronto trading.
The Brexit deal ignited a broad US dollar sell-off. EURUSD blasted through resistance in the 1.1090-1.1110 area and printed a high of 1.1139. A Brexit deal removes a lot of uncertainty in the European Union and should improve the economic growth outlook.
USDJPY traders seemed to ignore the Brexit drama. The currency pair traded in a narrow 108.65-1.0893 band despite the improved tone of the US/China trade talks and a jump in 10-year Treasury yields from 1.727% to 1.78% overnight.
The US/China trade negotiations are still a work-in-progress. A spokesman for China’s Ministry of Commerce Gao Feng said that they were working on the text of phase 1 of the deal. Mr. Feng also said “China’s position, principle and goal for the China-U.S. trade negotiations has never changed. Both sides’ ultimate goal for the negotiations is to end the trade war, cancel all additional tariffs. This is good for China, good for the US and good for the world.”
Nevertheless, the trade talks gave the antipodean currencies some support. AUDUSD rallied to 0.6788 from 0.6753 after Australian employment data was released. Australia added 14,700 jobs, in line with expectations, but the drop in the unemployment rate to 5.2% was the surprise. Gains were extended to 0.6831, where it is trading in Toronto, following the Brexit news. NZDUSD rallied in concert with AUDUSD.
Oil prices recovered about half of yesterday’s post-American Petroleum Institute (API) data losses, thanks to the news from Europe. API reported a 10 million barrel increase in US crude inventories which increased worries that supply is outstripping demand.
The Brexit news lifted US equity futures which suggests a positive open for Wall Street today. Also, there are many US economic reports on tap today, including the Philadelphia Fed Manufacturing Index. Canada releases Manufacturing Shipments data.
Today’s Suggested Range USD/CAD: 1.3140 – 1.3240
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