Canadian Dollar Update October 4, 2019 – Canadian Dollar is resilient
USD/CAD Open: 1.3334-1.3335 Overnight Range: 1.3296-1.3338
Oil is at $53.32 and gold is at $1,504.40. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3325. Support is at 1.3283.
The Canadian dollar is resilient. It has thwarted attempts to knock the floor out from under it, even as oil prices continue to weaken and that is unlikely to change anytime soon.
The US dollar came under renewed selling pressure yesterday. ISM Non-Manufacturing PMI data was weaker than forecast, and Factory orders soft. Thursday’s data came on the heels of weak ISM Manufacturing data on Tuesday, which suggests that US economic growth is contracting.
The poor data drove US Treasury yields lower as traders raised expectations that the Fed will cut interest rates at the end of October. Last Friday, the odds for such a move were below 50%. Yesterday, they were 87%, as per the CME FedWatch tool, which fueled US dollar selling against the G-10 major currencies. USDJPY suffered greatly, falling from 108.40 to 106.74 since Tuesday.
The British pound is wrapped in its Brexit world. UK Prime Minister Boris Johnson’s latest plan sparked rumours and counter-rumours. Initial reports that EU officials were modestly positive on the new proposals fueled a GBPUSD rally which drove prices from 1.2270 to 1.2410. That optimism was misguided, and prices retreated to 1.2330 before consolidating in a 1.2311-1.2355 range overnight.
EURUSD is struggling to gain upside traction amidst broad US dollar weakness vs the major G-10 currencies. Weak Eurozone data, Germany recession concerns and a dovish European Central Bank are limiting upside moves. Short term EURUSD technicals are bearish while prices are below 1.1110.
The US dollar weakness is taking a toll on oil prices. West Texas Intermediate (WTI) fell 9.0% this week on the back of slowing global growth expectations, rising US inventories, and rising US crude production. Those losses weighed on the Canadian dollar but not enough to drive it through major support.
AUDUSD rallied overnight, supported by better than expected Retail Sales data. Across the Tasmanian Sea, NZDUSD recorded gains as well, due to the US dollar weakness.
Nevertheless, FX markets were reasonably quiet overnight with traders awaiting today’s US employment report. Nonfarm payrolls (NFP) are expected to rise 145,000, a modest improvement over August’s 130,000 increase. If the results are substantially weaker than expected, the US dollar will get knocked for a loop as it would raise rate cut expectations to close to 100%. The Canadian dollar would benefit as well, although the gains may be limited.
The week ahead brings US inflation and Canadian employment reports. However, the focus will be on the start of US/China trade negotiations, scheduled for October 10/11.
Today’s Suggested Range USD/CAD: 1.3280 – 1.3380