Canadian Dollar Update, October 5, 2020 – Canadian Dollar and Trump recovering
USD/CAD Open: 1.3266-70, Overnight Range: 1.3257-1.3303
WTI Oil is at $39.33 and gold is at $1,919.10. US markets are higher today.
For today, USD resistance is at 1.3290. Support is at 1.3259.
• President Trump expected to leave hospital today
• Risk-on sentiment sinks US dollar, lifts equities
• GBPUSD supported by Brexit talks extension
The Canadian dollar and President Trump are recovering. The President did a “drive-by” on Sunday, to wave to supporters. His doctors say his condition is improving and that he could be released from the hospital today. That news reversed a large part of Friday’s “risk-off” move. Asia and European equity indexes rose, safe-haven FX trades were unwound, and oil prices climbed.
President Trump’s health, and uncertainty around the US election, which is less than a month away, will ensure FX volatility remains elevated.
Democratic challenger Joe Biden has about an 8% lead in the polls. In 2016, Hillary Clinton enjoyed a similar performance, and we know how that worked out.
Asia equity markets continue to be relatively quiet as China is still enjoying Golden Week holidays. Australia was closed as well.
EURUSD is trading at 1.1764, which is the top of its 1.1717-1.1764 range overnight. The reversal in risk sentiment from Friday to today, powered the single currency higher.
Eurozone economic data supported the gains. German and Eurozone Services and Composite PMI data was a touch better than expected.
However, soft French, Italian, and Spanish Services PMI, partially offset the news. Eurozone August Retail Sales jumped 4.4% m/m, thanks to pent-up demand. The Canadian dollar was undermined due to EURCAD demand.
GBPUSD rallied from 1.2902 to 1.2964 due to data and Brexit developments. UK August Services PMI was 56.1 compared to the forecast of 55. UK Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen noted progress was being made in the Brexit negotiations and agreed to extend the talks for another month.
USDJPY rallied as safe-haven trades were unwound, and because of a small increase in US Treasury yields. Bank of Japan Governor Haruhiko Kuroda told reporters that the domestic economy was in “severe condition,” but picking up. It was a nothing comment and justifiably ignored.
AUDUSD jumped aboard the rally bus. Prices rose to 0.7190 from 0.7160 with traders looking ahead to Tuesday’s Reserve Bank of Australia monetary policy meeting. The market is undecided about a rate cut. Some analysts believe the RBA will leave rates unchanged because the government releases a new stimulus budget on the same day.
US ISM services data is due today. The Canadian calendar is empty.
Today’s Suggested Range USD/CAD: 1.3220 – 1.3320