Canadian Dollar Update, September 7, 2021 – Canadian dollar rejects gains
USD/CAD Open: 1.2574-78, Overnight Range: 1.2512-1.2590, Previous Close: 1.2525
WTI Oil is at $68.03 and gold is at $1,797.90. US markets are mixed today.
For today, USD resistance is at 1.2658. Support is at 1.2603.
• Canadian dollar bounces off resistance and is testing support
• EURUSD supported by better-than-expected Eurozone GDP
• US dollar slightly higher compared to Friday’s open
The Canadian dollar tested support and resistance levels since Friday, and both levels remain intact. FX markets are cautious to start the week.
China trade data was better than expected, with the trade surplus rising to US $58.3 billion in August, compared to $56.6 billion in July. The news had little reaction among G-10 FX traders, who remain leery about the impact of China’s regulatory crackdown and the official hostile rhetoric around Hong Kong and Taiwan.
The Reserve Bank of Australia monetary policy decision was dovish. The Overnight Cash Rate (OCR) was left unchanged at 0.10%, but they tweaked their QE tapering program. The RBA had planned to reduce the $4.0 billion pace of bond purchases to $3.0 billion in November, but the COVID-19 outbreak forced them to delay the reduction until “at least February.”
They also repeated that they would not increase interest rates until inflation is sustained above 2-3%.
AUDUSD dropped from 0.7467 to 0.7392 on the news. NZDUSD dropped alongside AUDUSD but not to the same degree, and it sent AUDNZD down to 1.0382 from 104.50.
FX traders are re-evaluating the impact of the sharply weaker than expected nonfarm (NFP) payrolls report released Friday. The US only added 235,000 new jobs in August. Analysts were expecting 750,000. The initial reaction to sell US dollars has been fully reversed.
That’s because the July and June results were revised higher, and the unemployment rate ticked lower to 5.2%.
The NFP report did not convince bond traders that the data would deter the Fed from starting to taper in 2021. Treasury yields climbed to 1.36% from 1.288% on Friday.
EURUSD rallied to 1.1905 post-NFP and retreated to pre-NFP levels in early NY trading today, dropping to 1.1859. The mid-August EURUSD uptrend is intact above 1.1830, supported by a recent spate of positive Eurozone economic reports. Eurozone GDP rose 2.2% in Q2, and German ZEW data remained firm.
GBPUSD dropped from 1.3856 to 1.3769 in part due to EURGBP demand following the Eurozone data release. Traders ignored hawkish comments from Bank of England policymaker Michael Saunders suggesting a rate hike in 2022.
There are not any US or Canadian economic reports of note available today.
Today’s Suggested Range USD/CAD: 1.2570 – 1.2670