Canadian Dollar in Downtrend
The Canadian dollar is under pressure. Broad US dollar strength against the FX majors and lop-sided positioning have combined to drive the Canadian dollar lower. The slide began at the end of July and has continued with only minor interruptions since then.
There are several positive factors for the Canadian dollar. These include robust economic growth that targets 4.0% GDP growth in the second quarter and a Bank of Canada that is expected to raise interest rates again, in October.
Oil prices are another area of support to the Canadian dollar. West Texas Intermediate has bounced from the low and is probing resistance at $50.00/barrel. Oil prices are being supported by recent American Petroleum Institute (API) and Energy Information Admiration (EIA) data showing large crude oil inventory drawdowns last week. News that Saudi Arabia will be cutting their crude allocations by 530,000 barrels/day to customers beginning in September has added another layer of support.
The US dollar opened in New York with gains against the majors except for the Japanese yen. That is a result of yesterday’s mild risk aversion, stemming from the Trump/North Korea war of words, dissipating.
The Reserve Bank of New Zealand (RBNZ) left their policy rate unchanged at 1.75%, as expected, but the outlook for the Overnight Cash Rate (OCR) was not as doveish as expected NZDUSD jumped to 0.7366. Later Assistant Governor John McDermott repeated the need for NZDUSD to adjust down and traders obliged him. NZDUSD dropped and kept on dropping. It is trading in New York at 0.7260.
Strong US data releases and stretched positioning weighed on EURUSD, which traded in a 1.1705-1.1769 range. It opened at 1.1711. Traders ignored a Reuters survey that said 28 out of 50 economists survey expected the ECB to announce tapering plans in September
Sterling traded erratically in a 1.2953-1.3013 range. It peaked in Asia and bottomed out in the European morning. UK data was mixed. The trade deficit widened to GBP 4.56 billion while Manufacturing Production and Industrial production beat the May numbers. GBPUSD bounced back to 1.2995 after the data was released.
Today’s US data includes Producer Price Index (forecast 2.2%, y/y), and Initial Jobless Claims. USDCAD traders have New House Price data.
FX Ranges for major currency pairs