Canadian Dollar Update, October 21, 2022 – Canadian dollar unchanged from Monday open
USD/CAD Open: 1.3712-16, Overnight Range: 1.3766-1.3829, Previous Close: 1.3764
WTI Oil open at $84.29 and gold open at $1,625.39. US markets are higher today.
For today, USD resistance is at 1.3900. Support is at 1.3722.
- Canadian dollar rangebound albeit with bearish bias
- Global stocks pressure by higher US Treasury yields
- US dollar ending week on mixed note, GBP underperforms while NZD outperforms
The Canadian dollar is directionless inside the USDCAD 1.3660-1.3880 range that contained prices this week.
The Canadian dollar may be getting some support from hopes that the Bank of Canada (BoC) raises interest rates by 75 bps at next Wednesday’s monetary policy meeting. This week’s inflation report showed that inflation pressures are persistent and at 6.9% y/y, CPI is far above the BoC’s target of 2.0%. In addition, Monday’s Business Outlook Survey warned that inflation expectations may be becoming entrenched, one of the BoC’s major concerns.
The Canadian dollar isn’t deriving much benefit from the hawkish BoC outlook. Part of the reason is that the 10-year Canadian Government Bond yield is 58 bps below the US 10-year Treasury yield.
Oil prices are not doing the Canadian dollar any favours. WTI oil traded sideways in a $83.18-$85.16/b range overnight and is down 9.1% since October 10. Prices garnered a little support following reports that Saudi Arabia and China agreed to cooperate to promote price stability.
Canada Retail Sales are expected to have risen 0.2% m/m in August, compared to -2.5% m/m in July. Core Retail Sales (ex-autos) is expected at 0.4% compared to a 3.1% m/m dip previously.
As usual, domestic data is largely a non-factor in USDCAD trading.
EURUSD is in the middle of its 0.9733-0.9801 range. Traders are very aware of a string of chunky option strikes expiring at 10:00 am ET. $2.95 billion expire between 0.9700 and 0.9725, and $3.1 billion between 0.9745 and 0.9800. Traders are also cautious ahead of next week’s ECB monetary policy meeting.
GBPUSD traded with a negative bias and dropped from 1.1236 to 1.1102 due to a mix of broad US dollar demand and political uncertainty in the UK. UK data didn’t do the currency any favours, with Retail Sales dropping 1.4% m/m in September compared to expectations for just a 0.5% decline.
USDJPY’s second attempt above 150.00 went through the level like a hot knife through butter and then shredded the 151.00 area. USDJPY traded in a 150.07-151.58 range underpinned by the firm US 10-year Treasury yield.
AUDUSD and NZDUSD were range bound but poised to end the week with small gains.
There are no top tier US economic reports today.
Today’s Suggested Range USD/CAD: 1.3700– 1.3800