Canadian Dollar Update September 16, 2019 – Canadian Dollar rallies on oil price rise
USD/CAD Open: 1.3220-1.3221 Overnight Range: 1.3209-1.3266
Oil is at $60.12 and gold is at $1,508.60. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3274. Support is at 1.3214.
The Canadian dollar gapped higher in Asia when oil prices surged upwards. West Texas Intermediate jumped to $63.15/barrel after closing on Friday at $54.83/b after news that drone attacks on Saudi Arabian oil fields knocked over 50% of the Kingdom’s oil production offline. There isn’t any word when production will resume. The US blamed Iran for being behind the attacks, and President Trump announced that America was “locked and loaded.” He also authorized the release of oil from the US Strategic Petroleum Reserves which helped prices to ease lower.
The Canadian dollar rallied. USDCAD dropped from 1.3287 at Friday’s Toronto close to 1.3210 at the Asia open. Prices drifted higher during the European session and started trading in Toronto, just above the mid-point of the overnight range. External developments will be the major driver of Canadian dollar moves this week, leaving domestic data to muddy the waters. Canada Manufacturing Sales, Inflation and Retail Sales reports are due Tuesday, Wednesday and Friday, respectively.
Weaker than expected Chinese data and comments from the Chinese Premier may have exacerbated global recession fears. China August Retail Sales, (Actual 7.5% y/y vs forecast 7.9% y/y and July 7.6%y/y) and Industrial Production, (Actual 4.4% y/y vs forecast 5.2%) missed their forecasts, underscoring the negative impact from US tariffs. Chinese Premier Li Keqiang warned that the economy was facing downward pressure and that it “is difficult” for their economy to grow at 6%. The news weighed on the New Zealand dollar.
The Japanese yen jumped as investors sought safe-haven currencies. USDJPY also came under pressure when US Treasury yields fell. 10-year Treasury yields dropped from 1.92% to 1.82% on fears that a prolonged oil price spike combined with ongoing US/China trade war, would lead to a global recession.
The British pound traded nervously. Prices consolidated Friday’s gains but drifted off Friday’s closing level. Short GBPUSD positions continue to be squeezed on hopes that the UK will avoid a “NO-DEAL” Brexit in two weeks. Prime Minister Boris Johnson is meeting EU President Jean-Claude Juncker today. The EU is waiting for Britain to propose an alternative to the Irish backstop plan. Mr. Johnson is adamant that the UK will leave the EU if there is not a deal and he will not except any extensions.
EURUSD safe-haven demand was more than offset by last week’s ECB announcement of another quantitative easing program and interest rate cut. EURUSD is trading at the bottom of its overnight 1.1029-1.1085 range.
There isn’t much in the way of actionable economic data from Canada or the US. In addition, traders may keep their powder dry ahead of Wednesday’s FOMC meeting.
Today’s Suggested Range USD/CAD: 1.3170 – 1.3270
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