Canadian Dollar Update, October 7, 2020 – Canadian Dollar drifting ahead of FOMC minutes
USD/CAD Open: 1.3307-11, Overnight Range: 1.3269-1.3340
WTI Oil is at $39.61 and gold is at $1,889.20. US markets are higher today.
For today, USD resistance is at 1.3311. Support is at 1.3257.
• Markets recovering from Trump tweet cancelling Stimulus negotiations
• Traders hoping for direction from FOMC minutes
• US dollar pares afternoon gains in choppy overnight session
The Canadian dollar sank then soared yesterday afternoon and in early Asia trading. USDCAD prices topped out at 1.3339, then retreated to 1.3298 in early Toronto trading.
The price volatility did not have anything to do with domestic data or events. Instead, President Trump was the catalyst.
Around the middle of the afternoon on Tuesday, he sparked a wave of risk-aversion trades when he tweeted: “Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their… Mitch McConnell not to delay, but to instead focus full time on approving my outstanding nominee to the United States Supreme Court, Amy Coney Barrett. Our Economy is doing very well. The Stock Market is at record levels, JOBS, and unemployment… …also coming back in record numbers. We are leading the World in Economic Recovery, and THE BEST IS YET TO COME!”
The US dollar soared, equities sank, and gold prices dropped 2.4%.
The Canadian dollar was collateral damage.
Mr. Trump wasn’t finished jerking markets around. A little while later he tweeted: “If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?”
That tweet signaled that a modest stimulus package was still possible and risk aversion trades were unwound.
Fed Chair Jerome Powell’s remarks didn’t create much of a stir yesterday. He didn’t say anything new but did warn that new coronavirus cases made the economic outlook uncertain. Markets will closely scrutinize the FOMC minutes as there were two dissenting votes at the September 16 meeting, which suggests the Committee is far from unified.
EURUSD is trading at the top of its overnight 1.1726-1.1775 range. The gains are supported by Trump’s tweet offering to send out $1,200 COVID-19 relief cheques and by ECB President Lagarde’s comments on Tuesday, suggesting the need for additional monetary stimulus.
GBPUSD traded erratically in a 1.2851-1.2928 range. Renewed hard Brexit fears overwhelmed bearish US dollar sentiment from renewed stimulus hopes, which weighed on prices.
FX markets will be quietly rangebound until the FOMC minutes are released this afternoon.
Today’s Suggested Range USD/CAD: 1.3260 – 1.3360