Canadian Dollar Update, September 2, 2020 – Canadian Dollar rally hits a wall
USD/CAD Open: 1.3058-62, Overnight Range: 1.3053-1.3095
WTI Oil is at $41.60 and gold is at $1,941.20. US markets are higher today.
For today, USD resistance is at 1.3103. Support is at 1.3022.
• Yesterday, US Manufacturing PMI strength fueled US dollar gains
• Soft Eurozone data, dovish ECB expectations weigh on EURUSD
• US dollar opened with gains compared to Tuesday close
Canadian dollar bulls slammed into a wall yesterday. USDCAD dropped below the psychologically important 1.3000 level, but the dip was shallow and short-lived. The move did not have anything to do with domestic influences, but it was because of a shift in US dollar sentiment.
Tuesday, the US ISM Manufacturing Index surged to 56 from 54.2 in July, forcing economists to re-assess their forecasts for US growth. The prospect of a more robust than expected US economic rebound, combined with low Eurozone inflation data yesterday, and weak German Retail Sales data today, underpinned the greenback.
EURUSD traders are speculating about a dovish policy statement from the European Central Bank (ECB) on September 10 with a risk of US-style average inflation targeting stance. EURUSD touched 1.2010 yesterday then dropped below minor support at 1.1970, which led to a further drop to 1.1912 at Tuesday’s close. Selling continued in Asia. Weak German Retail Sales data exacerbated the downside pressure in Europe. Prices continued to drop in NY and hit 1.1846 and targeting 1.1780 support.
GBPUSD dropped alongside the single currency after failing to touch 1.3500. GBPUSD fell from 1.3401 to 1.3327 overnight, and a break below 1.3320 would extend losses to 1.3215.
NZDUSD outperformed its AUDUSD counterpart, overnight. NZDUSD rallied after RBNZ Governor Adrian Orr suggested he was not concerned with the currency at current levels. Traders may have decided to buy Kiwi in hopes of finding the level which would get the governor’s concern. NZDUSD rallied to 0.6787 from 0.6749 but gave back those gains by the Toronto open.
AUDUSD suffered after Q2 GDP fell 0.7%, putting the country into a technical recession, the first in 20 years. No one should have been surprised by the GDP drop as it follows on the heels of similar performances around the world. Overall US dollar strength weighed on the currency pair more than the data.
Today’s US data calendar is light, but ADP employment often attracts attention. ADP was expected to show a gain of 950,000 jobs in August and ended up being 428,000 instead. This results in less confidence for a better than expected nonfarm payrolls result on Friday.
Today’s Suggested Range USD/CAD: 1.3010 – 1.3110