Canadian Dollar Update, September 10, 2020 – Canadian Dollar ignores benign BoC
USD/CAD Open: 1.3156-60, Overnight Range: 1.3119-1.3169
WTI Oil is at $37.58 and gold is at $1,962.50. US markets are mixed today.
For today, USD resistance is at 1.3211. Support is at 1.3103.
• BoC statement doesn’t inspire, Perhaps Governor Macklem will today
• EU meeting may not live up to advanced billing
• US dollar on the defensive vs the majors, except commodity bloc
The Canadian dollar rallied after hitting a three-week low yesterday. USDCAD peaked at 1.3255 on Wednesday, then dropped to 1.3133 in Asia overnight. The price action was all due to the fortunes of EURUSD. The single currency rejected losses below support in the 1.1760 area and rebounded to 1.1840.
The ECB did not surprise anyone (so far). They left interest rates and policy unchanged. Traders are patiently awaiting the ECB press conference for more insight. There were concerns in some quarters that the statement might refer to the exchange rate, which would have been “verbal intervention.”
GBPUSD is in the crosshairs again. The EU/UK Joint Commission is meeting, and tensions are high. EU Chief Trade Negotiator Michel Barnier reportedly threatened to disrupt exports of food between Great Britain and Northern Ireland if there wasn’t a trade deal. That is what sparked the UK’s decision to make changes to the withdrawal agreement. Those proposed changes have angered the EU who are threatening to take the UK to court and levy a lump-sum fine. Trade war worries and the rising risk of a second wave COVID-19 outbreak across the UK are weighing on the currency.
The Bank of Canada monetary policy statement did not give Canadian dollar traders any ammunition. The BoC managed to tread a fine line between optimism and pessimism. They noted, “the bounce-back in activity in the third quarter looks to be faster than anticipated in July.” That good news was offset when they said “The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.”
Canadian dollar price action continues to track EURUSD moves, but additional gains may lag. That’s because crude oil prices are slumping. West Texas Intermediate, the North American benchmark price has dropped 13% in the past ten days, due to concerns about dwindling demand, especially from China.
FX markets will track equity moves, and equity traders will take their cue from today’s US Weekly Jobless Claims report. Claims are expected to decline again, which suggests an ongoing US economic recovery.
Today’s Suggested Range USD/CAD: 1.3110 – 1.3210