Canadian Dollar Update, September 13, 2021 – Canadian dollar pressured by broad US dollar demand
USD/CAD Open: 1.2610-14, Overnight Range: 1.2664-68, Previous Close: 1.2692
WTI Oil is at $70.70 and gold is at $1,792.50. US markets are mixed today.
For today, USD resistance is at 1.2700. Support is at 1.2628.
• Fed expected to taper in November
• Traders ignore robust Canadian economic data
• US dollar opens higher, extending Friday’s gains
The Canadian dollar should have soared Friday, after Statistics Canada reported 90,200 new jobs were created in August. It didn’t happen. The Canadian data was greatly overshadowed by higher-than-expected US PPI data. The report showed PPI rose a record 8.3% y/y in July. The results underpinned Philadelphia Fed President Patrick Harker’s call for tapering to start “sooner rather than later.”
The US data, concerns about the rising COVID-19 delta-variant cases and sliding equity markets fueled US dollar demand across the board. The Canadian dollar was collateral damage.
The US dollar extends gains overnight, mainly because of a lack of economic data although ongoing Chinese government actions didn’t help sentiment.
Chinese authorities continued with their crackdown on tech stocks with officials planning to break up Alipay and demanding improved working conditions for workers. Taiwan is also on the radar screen. China Global Times took a shot at the US and told them to “stop exerting extreme pressure on China and to refrain from provocations at China’s doorstep”.
They were also unhappy with US Navy ships transiting the Taiwan Strait and a US proposal to rename the US office in Taiwan.
Oil prices remain elevated despite increased Opec production. Analysts at Bank of America suggested WTI oil could hit $100.00/barrel if weather turns cold earlier than usual.
The firmer oil prices combined with the domestic employment report, and bearish USDCAD technicals suggest the Canadian dollar should trade higher.
EURUSD is under pressure again after failing to sustain gains above 1.1900 and then plunging below 1.1800. The ECB announced plans to taper, but they were wrapped in a very dovish package that leaves EURUSD exposed to a widening US and ECB interest rate differentials.
The drop below 1.1800 suggests further weakness to 1.1700.
GBPUSD is outperforming against the single currency due to rising expectations that the Bank of England will raise interest rates well-ahead of the ECB. However, gains were tapered because of recent Chinese actions which may turn global risk sentiment negative and spark a flight to safe-haven US dollars.
USDJPY is hovering around the 110.00 area. Steady US 10-year Treasury yields support prices, but gains are capped by lingering risk uncertainty.
The US and Canadian economic calendars are empty today.
Today’s Suggested Range USD/CAD: 1.2600 – 1.2700