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Canadian Dollar Update September 3, 2019 – Canadian Dollar breaking down

USD/CAD Open: 1.3321-1.3322 Overnight Range: 1.3319-1.3382

Oil is at $53.11 and gold is at $1,558.40. US markets are lower today.

The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3380. Support is at 1.3302.

The Canadian dollar sank below the support level which had contained all downside moves during August. The breach turned the technical picture to bearish and pointed to further losses in the days ahead. Adding insult to injury, the Canadian dollar losses were due to external influences, not domestic developments.

Oil prices remain in the downtrend which began in April. Last week’s West Texas Intermediate (WTI) price rally stalled on the downtrend line. ($56.70/barrel). Prices quickly retreated below minor support at $55.30/b to extend losses to $53.82 in early Toronto trading, today. Selling pressure occurred. OPEC reported an increase in crude production in August. Also, the new tariffs imposed on Chinese imports to the US and US imports into China, which came into effect on Sunday, elevated concerns for a prolonged trade war. The prospect of weaker global crude demand due to slowing global growth exacerbated selling pressures, which undermined the Canadian dollar.

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UK political developments played a role as well. The British parliament returns from their summer recess today amidst Prime Minister Boris Johnson’s threat of an election on October 14. He wants the UK to leave the EU with or without a deal, on October 31. The opposition do not want a “no-deal Brexit” to happen and hope to pass a bill in the next few days that will ask for a three-month extension o the Brexit deadline. Traders did not like what they heard and sold GBPUSD down from Friday’s close of 1.2166 to 1.1959. Prices have rebounded to 1.2054 in early Toronto trading. In addition, Monday’s UK Markit PMI data for August was weaker than forecast as was this morning’s UK Construction PMI data.

EURUSD suffered from the Sterling sell-off and is currently trading just above the overnight low of 1.0932. The single currency is under pressure because of weak Eurozone data and expectations for a new monetary stimulus plan being announced at the European Central Bank policy meeting next week. The drop in EURUSD fueled broad US dollar demand which undermined the Canadian dollar.

FX traders are eyeing recessions concerns again. The US yield curve is inverted again with the 10-year Treasury yield at 1.484% while the 2-year yield is 1.50%. European bourses are in the red and US equity futures are pointing to a negative open for Wall Street.

There are not any Canadian economic data releases of note today. US ISM Manufacturing and Construction spending reports are on tap.

Today’s Suggested Range USD/CAD: 1.3270 – 1.3370

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By KBFX | September 3, 2019 | Daily Update | 0 comments