Canadian Dollar Update, September 4, 2020 – Canadian Dollar idling ahead of NFP
USD/CAD Open: 1.3089-93, Overnight Range: 1.3064-1.3140
WTI Oil is at $39.41 and gold is at $1,934.30. US markets are lower today.
For today, USD resistance is at 1.3130. Support is at 1.3026.
• Wall Street meltdown leaves markets on edge
• US expected to gain 1.4 million jobs while Canada adds 246,000
• US dollar gives back some gains overnight, but is still higher than Monday’s opening levels
The Canadian dollar is heading into the Labour Day long weekend on the defensive. A combination of better than expected US economic data this week, and a minor equity market meltdown on Wall Street, sparked a robust US dollar rally yesterday. The greenback gave back some of its gains due to a lack of follow-through in Asia and Europe.
Asia equities closed with losses but nothing like what occurred on Wall Street. The jury is still out as to whether the NASDAQ’s 4.96% plunge, the S&P 500’s 3.51% drop, and the Dow Jones Industrial Average 2.78% loss, is the start of a much need correction, or just a speed bump on the road to more record highs. Global equity market price action overnight suggests they are opting for the “speed bump” analogy. European bourses are flitting between positive and negative, and S&P futures are flat.
US nonfarm payrolls are expected to show that America regained 1.4 million jobs in August. It seems impressive until you consider that the US lost 22.2 million jobs between February and April, and only recovered 9.6 million. Today’s results should remind traders that the US still has a long way to recover from the pandemic fully.
The story isn’t any different in Canada. The job gain numbers are chunky, but Canada still needs about 1.4 million jobs to bring employment back to pre-pandemic levels.
EURUSD’s plunge to 1.1790 yesterday from 1.2010 looked like a serious move. The reality is different. If prices remain above the 1.1700-60 level, the uptrend from May is intact. EURUSD price action may get noisy between NFP release, and the 10:00 am ET option expiry time due to chunky options strikes in the 1.1780-00 and 1.1870-1.1900 area. Traders are still mulling over the risk of very dovish ECB policy statement next week.
GBPUSD bounced erratically in a 1.3257-1.3318 range, with the bulk of the move occurring during the European session. Fresh Brexit worries may have contributed to the selling. Bank of England policymaker Michael Saunders warned that the BoE’s Brexit forecast might be too optimistic. The UK Daily Express quoted some government officials warning of just a 30-40% chance for a deal. However, the GBPUSD uptrend line from May is intact while prices are above 1.3180.
Market price action will diminish sharply this afternoon as traders head out early to get a head start on the last long weekend of the summer.
Today’s Suggested Range USD/CAD: 1.3040 – 1.3140