Canadian Dollar Update, October 7, 2021 – Canadian dollar Rebounds (again)
USD/CAD Open: 1.2582-86, Overnight Range: 1.2566-1.2698, Previous Close: 1.2592
WTI Oil is at $78.42 and gold is at $1,758.20. US markets are higher today.
For today, USD resistance is at 1.2568. Support is at 1.2526.
• Possible US debt ceiling deal turns risk sentiment positive
• Risk Russia to rescue Europe from gas shortage woes-maybe
• US dollar opens a tad softer compared to Wednesday
The Canadian dollar continued to churn inside its well-defined range in another choppy but ultimately directionless overnight session.
The Canadian dollar is caught up in a series of external events which have dictated direction for the past week. Some of those events are coming to a head.
Risk sentiment soured because the US Democrats and Republicans could not come to terms with either raising or extending the debt ceiling. The debt ceiling caps the amount of money that the government can borrow.
When borrowing reaches the limit, the government must raise the ceiling or risk defaulting on debt. The ceiling always gets raised, but it usually comes down to the wire.
Traders know that the US will not default but still get nervous due to the “politicking” ahead of an agreement, which is why Wall Street equities have retreated from their peak.
Another major source of consternation came from the surge in natural gas and oil prices. Natural gas (NGX) prices jumped over 50% from the beginning of September until yesterday. The moves raised fears of rising inflation which would force central banks to increase interest rates.
West Texas Intermediate (WTI) oil prices surged 18.5% in the same period, which exacerbated inflation fears and threatened to derail the global economic recovery. Opec declined to intervene and left production unchanged from previously announced levels.
The US administration is discussing releasing oil from its Strategic Petroleum Reserves (SPR), which will mitigate price pressures in the short run.
Russian President Vladimir Putin said Russia would consider increasing gas deliveries but added the decision would be easier if the European Union quickly approved the Nord Stream 2 pipeline. Russia’s Deputy Premier blamed the gas shortage on US increases in Liquid Natural Gas (LNG) exports to Latin America.
EURUSD traded in a 1.1550-1.1571 band with prices weighed down by weaker than expected German Industrial production data and ongoing German political uncertainty.
GBPUSD is having a good day. Hawkish comments by Bank of England Deputy Governor Huw Pill suggesting that rising inflation is becoming a greater concern and that inflation may be longer-lasting than previously estimated. GBPUSD climbed to 1.3617 in NY.
AUDUSD and NZDUSD rallied with the shift in risk sentiment.
The only US data of note is weekly Jobless claims.
Today’s Suggested Range USD/CAD: 1.2530 – 1.2630