Canadian Dollar Update September 20, 2019 – Canadian Dollar still adrift
USD/CAD Open: 1.3260-1.3261 Overnight Range: 1.3253-1.3300
Oil is at $58.66 and gold is at $1,510.40. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3309. Support is at 1.3263.
The Canadian dollar is still adrift. The currency is unable to sustain rallies or losses beyond and entrenched USDCAD range of 1.3140-1.3440 for over two months. It is not alone. The G-10 major currencies have been mostly rangebound during the same period due to uncertainties around global trade growth and central bank monetary policies. This week the Fed cut rates, the Bank of Japan and Bank of England left rates unchanged while Norway’s Norges Bank raised rates by 0.25%. No matter what action was taken, the underlying theme in the central bank policy statements was “downside risks to their outlook from global trade tensions.”
Those global trade tensions may be abating somewhat. Chinese and US trade officials are meeting in Washington. CNBC reported that the American’s are temporarily exempting over 400 Chinese products from tariffs, which were levied last year. The debate is whether the exclusion is progress with the trade talks or just the US repairing some of the damage that the tariffs inflicted on its economy.
Asia FX markets had a modest positive risk bias, in part to reports about Brexit. AUDUSD and NZDUSD rallied but erased all the gains in Europe. AUDUSD opened in Toronto, unchanged, while NZDUSD lost ground.
USDJPY dipped during the Asia session and then recouped those losses in Europe, only to open in Toronto unchanged from Thursday’s close. Price action mirrored US 10-year Treasury price changes.
GBPUSD hung on to yesterday’s gains and extended them during the Asia session. However, skepticism about the reported “progress” in the Brexit talks along with a dose of profit-taking knocked GBPUSD from 1.2580 to 1.2490 in Toronto trading. EU President Jean-Claude Juncker said that a deal was possible before the October 31 deadline. UK Prime Minister Boris Johnson said there was progress with the Brexit negotiations, but the Irish Deputy Prime Minister disputed that claim. He said, “we are not close to a deal.” GBPUSD has given back all of yesterday’s gains.
EURUSD tracked GBPUSD lower. EURUSD selling was exacerbated by weaker than expected German PPI data. August PPI fell 0.5% compared to a 0.1% rise in July.
St Louis Fed President James Bullard explained his reasons for dissenting at Wednesday’s FOMC vote. He wrote: “In my view, lowering the target range by 50 basis points to 1.50%-1.75% would have been a more appropriate action. The following considerations factored into my decision. First, there are signs that U.S. economic growth is expected to slow in the near horizon. Trade policy uncertainty remains elevated, U.S. manufacturing already appears in recession, and many estimates of recession probabilities have risen from low to moderate levels. Moreover, the yield curve is inverted, and our policy rate remains above government bond yields for nearly every country in the G-7.”
Canadian July Retail Sales are forecast to rise 0.6% compared to 0.0% in June.
Today’s Suggested Range USD/CAD: 1.3210 – 1.3310