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“The Canadian dollar was caught in the downdraft of geopolitical grandstanding. US President Donald Trump decided to remove the United States from the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran Nuclear deal”. Said Rahim Madhavji, President of KnightsbridgeFX, a currency exchange company that helps Canadians get better exchange rates than the banks.
President Trump did so in his usual blustery way, accusing Iran of sponsoring global terrorism. Despite his actions, other signatories to the deal, France, Germany and Great Britain, said they would continue with the agreement.
Fear that new US sanctions against Iran would hit that country’s oil exports led to a big jump in oil prices. WTI climbed from yesterday afternoon’s $67.65/barrel low to $71.11 overnight. Prices are currently flirting with the $71.00/b level. The Canadian dollar typically benefits from rising oil prices.
The jump in oil prices provided a bit of support to the Canadian dollar. The US dollar soared to 1.2990 USDCAD yesterday and then consolidated inside a 1.2940-80 range until just before this morning’s open in Toronto. The Canadian dollar started rising, in concert with US dollar losses across the board. USDCAD dropped through support at 1.2940 and tested support in the 1.2895 area.
Today’s Canadian dollar rally may just be temporary as the long-term uptrend are still valid while prices are above 1.2970 and 1.2830.
Expectations that US interest rates will increase at least two more times in 2018, with many believing that three more rate hikes are in the cards have underpinned US dollar sentiment. That sentiment is reinforced by dovish results from other central banks including, the Bank of Canada, the Reserve Bank of Australia, the Bank of Japan and the European Central Bank. The Reserve Bank of New Zealand and Bank of England results are due tomorrow.
Rising oil prices may be the Canadian dollar outlook’s saving hope in the short term.
There wasn’t any European data of note and traders were happy for EURUSD to consolidate its recent moves. EURUSD traded in a 1.1823-1.1887 range overnight and is probing topside resistance in the 1.1900 area in early Toronto trading.
Sterling was under pressure early, in Asia but prices recovered in Europe. GBPUSD rallied from 1.3500 to 1.3601 with trading taking profit on short positions ahead of Thursday’s BoE Quarterly Inflation Report and BoE policy statement.
USDJPY popped in Asia, climbing from 109.01 to 109.62. The rally continued in Europe supported by 10-year Treasury yields above 3.0%.
AUDUSD and NZDUSD dropped on US dollar weakness and a poor technical outlook. NZDUSD suffered from soft Electronic Card Retail Sales data as well The RBNZ policy meeting will be at 5:00 pm EDT today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
FX Ranges
|
Open |
High |
Low |
close |
EURUSD |
1.1854 |
1.1868 |
1.1823 |
1.1861 |
USDJPY |
109.74 |
109.79 |
109.01 |
109.11 |
GBPUSD |
1.3526 |
1.3556 |
1.3500 |
1.3547 |
USDCHF |
1.0025 |
1.0041 |
1.0013 |
1.0020 |
AUDUSD |
0.7438 |
0.7452 |
0.7414 |
0.7453 |
NZDUSD |
0.7019 |
0.6974 |
0.6951 |
0.6967 |
USDCAD |
1.2940 |
1.2973 |
1.2930 |
1.2952 |
GOLD |
1,306.60 |
1316.59 |
1304.59 |
1314.60 |
WTI |
71.03 |
70.24 |
69.88 |
69.73 |
