Canadian Dollar Update October 3, 2019 – Canadian Dollar testing support
USD/CAD Open: 1.3322-1.3323 Overnight Range: 1.3313-1.3347
Oil is at $51.80 and gold is at $1,508.00. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3360. Support is at 1.3309.
The Canadian dollar was beaten up yesterday and tested support at USDCAD 1.3340. It held, but subsequent Canadian dollar gains have been shallow, and the currency is vulnerable to renewed selling pressures.
Fresh US trade war concerns, this time with the European Union, and renewed recession fears from a slew of weak economic reports, sparked a steep sell-off on Wall Street, yesterday. The Dow Jones Industrial Average fell nearly 500 points, and the S&P 500 dropped 1.79% leading to a broad US dollar retreat. The Canadian dollar fell in sympathy with the greenback as a recession in America is negative for Canada as well.
Canadian dollar selling intensified following the US Energy Information Administration (EIA) data reporting crude inventories rose 3.1 million barrels in the week ending September 27. Traders were spooked by both rising US supply and production even as global economic growth continues to falter. West Texas Intermediate, the North American benchmark price dropped from $55.90/barrel on Monday to $52.27/b overnight, which weighed on the Canadian dollar.
The recession fears drove US Treasury yields and USDJPY lower. 10-year Treasury yields plunged from 1.74% on Tuesday to 1.572% in early Toronto trading today. USDJPY fell to 106.88 from Tuesday’s peak of 108.42.
The Canadian dollar has underperformed against the other commodity bloc currencies, AUDUSD and NZDUSD. Those currency pairs rallied on the back of narrowing Australian, and New Zealand interest rate spreads to the US dollar. AUDUSD shrugged off weaker than expected Services PMI data and a dip in its Trade surplus.
Rising hopes that the UK could avoid leaving the EU on October 31 without a deal have underpinned GBPUSD prices. Prime Minister Boris Johnson submitted some proposals to the EU which were not rejected by EU President Jean-Claude Juncker. However, Mr. Johnson maintains the UK will leave on October 31, “with or without a deal.” The EU believes a deadline extension is more likely, and GBPUSD traders do as well, judging by its recent gains. GBPUSD rallied to 1.2324 from 1.2275 in early Toronto trading.
EURUSD attempted to rally during the European session, but gains were thwarted by weaker than forecast Market Services PMI and PPI reports. August Retail Sales were unchanged at 0.3% month over month. EURUSD declined to 1.0942 from 1.0972.
There are many US economic reports on the agenda today. Traders will be focusing on the ISM Services and Composite PMI data. Steady to better than expected results will help Wall Street recoup some of yesterday’s losses and lessen recession risks. The Canadian calendar is empty.
Today’s Suggested Range USD/CAD: 1.3270 – 1.3370
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