Canadian Dollar Update, September 3, 2021 – Canadian dollar breaking higher
USD/CAD Open: 1.2548-52, Overnight Range: 1.2536-1.2558, Previous Close: 1.2553
WTI Oil is at $69.90 and gold is at $1,828.50. US markets are mixed today.
For today, USD resistance is at 1.2593. Support is at 1.2455.
• Canadian dollar boosted by hopes for a tame NFP report and higher oil prices
• EURUSD ignores weak economic data
• US dollar consolidates losses ahead of NFP
The Canadian dollar consolidated yesterday’s gain in a subdued overnight session.
Wednesday’s disappointing ADP employment results led to a downgraded forecast for today’s US nonfarm payrolls report. Traders are positioned for NFP employment gains to fall well short of the 750,000 forecast.
A weaker than expected result suggests Fed Chair Jerome Powell’s view that the employment picture remains very weak and that it is too soon to start tapering or reduce monetary support.
If NFP surprises to the upside, especially if guesses for 1.0 million new jobs are accurate, the US dollar will soar with gains exacerbated by existing short US dollar positioning.
The US dollar will likely rally even if today’s result is exactly as predicted or only slightly lower.
The Canadian dollar rallied on the back of broad US dollar selling pressure but got an added assist by the rise in oil prices.
West Texas Intermediate (WTI) has risen from $67.10/barrel on Monday to $70.29/b today despite Opec increasing production and signs China’s economy is slowing. Caixin China Serves PMI fell to 46.7 in August, down from 54.9 in July.
Canadian dollar traders are also ignoring weak domestic data. Tuesday Statistics Canada reported Q2 GDP fell 1.1% q/q, which was well below the 2.5% q/q forecast. The “flash” estimate for July is a mere 0.4%. Supply chain issues played a major role, but regardless the domestic economy is not recovering at the pace previously anticipated.
Traders are also ignoring the latest promise from Justin Trudeau to increase spending by $75 billion, which is on top of the nearly $400 billion deficit already in place.
Perhaps traders will get more clarity on the Canadian dollar direction next week.
The Bank of Canada monetary policy meeting is September 8. It is a statement-only affair, which suggests there won’t be any market-moving announcements.
However, Governor Tiff Macklem speaks about monetary policy the next day. Nevertheless, weak economic data and rising delta-variant coronavirus cases suggest monetary policy will remain unchanged.
Next week is a big week for EURUSD traders. The ECB monetary policy meeting is Thursday. Eurozone inflation spike well above the ECB’s target level, which has raised speculation that policymakers may announce a tapering plan.
Monday is a holiday in the US and Canada, which means trading activity will likely evaporate after lunch.
Today’s Suggested Range USD/CAD: 1.2480 – 1.2580