Canadian Dollar Update September 6, 2019 – Canadian dollar awaiting employment reports
USD/CAD Open: 1.3227-1.3228 Overnight Range: 1.3160-1.3244
Oil is at $55.10 and gold is at $1,533.00 US markets are mixed today.
The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3202. Support is at 1.3150.
The Canadian dollar rally stalled. Prices consolidated in a USDCAD range of 1.3198-1.3233 range overnight ahead of today’s employment reports from the US and Canada. Analysts forecast a 15,000 increase in Canadian employment, a substantial improvement from July when Canada lost 24,200 jobs. There is a risk of a weaker than expected result because of the significant increases seen earlier this year.
The Canadian jobs report may get lost in the frenzy of the US nonfarm payroll results, especially if there is a substantial deviation from the forecast increase of 158,000. Some economists expect an upward surprise to the forecast because Wednesday’s ADP employment results were surprisingly robust. Other economists say that ADP data is not a good barometer for NFP results.
Better than expected US NFP data will spark a renewed US dollar rally. That’s because it suggests the Fed can continue to assess the economy and delay cutting interest rates.
Speaking of cutting interest rates, the People’s Bank of China (PBoC) announced plans to cut the Reserve Requirement Ratio (RRR) 50 basis points, effective September 16. Some qualified city commercial banks could see their RRR cut by 100 basis points. FX markets didn’t react to the news as the cuts were anticipated.
The Canadian, Australian, and New Zealand dollars were the only currencies to open in Toronto with gains against the US dollar, compared to Thursday’s close. The Swiss franc and British pound lost ground while the Japanese yen and Euro were unchanged. However, AUDCAD and NZDCAD have outperformed USDCAD all week.
GBPUSD was the biggest loser overnight, weighed down by UK political drama. The currency pair dropped on news that the British high court ruled Prime Minister Johnson’s plan to prorogue parliament was legal. Traders were also unhappy after Labour leader Jeremy Corbett said his party would not support a vote for an early election. GBPUSD dropped from 1.2342 to 1.2287 on the news.
EURUSD was adrift in narrow range. Prices have declined steadily since the beginning of the month due to concerns of less aggressive Fed rate cutting and anticipation of the European Central Bank (ECB) meeting next Thursday. The ECB telegraphed its intention to provide additional stimulus measures at the July meeting. Today, analysts expect a 10-20 basis point cut in the deposit rate, which is already negative.
Canada Ivey Purchasing Managers Survey data is due at 10:00 am EDT. Also, traders are looking ahead to Fed Chair Jerome Powell’s speech, scheduled for 12:30 pm.
Today’s Suggested Range USD/CAD: 1.3280 – 1.3380
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