Canadian dollar bulls and bears are dancing to the tune of moving averages. The Canadian dollar sellers emerged when USD/CAD broke above the 200-day moving average for USD/CAD, at $1.3275 last Tuesday. The losses were minimal, and momentum quickly waned. The Canadian dollar broke below that average yesterday and shifted the focus to the 100-day moving average. The shift didn’t have anything to do with Canadian economic or political news but resulted from a change to positive risk sentiment.
The Canadian dollar continues to recoup losses that resulted from Bank of Canada Deputy Governor Carolyn Wilkins remarks last Tuesday. She warned of downside risks to the economy and said: "Our policy interest rate may be relatively low now, but at 1.75% we still have room to manoeuvre. And, we have other options in our tool kit, such as extraordinary forward guidance and large-scale asset purchases." Canadian dollar traders thought she was signaling domestic rates were going lower and sold the currency. BoC Governor Stephen Poloz contradicted that sentiment two days later in remarks to the Ontario Securities Commission. He hinted that domestic rates would remain steady. The Canadian dollar has been grinding higher since then.
U.S. President Trump and his key China trade negotiators have been making optimistic comments about the ongoing U.S./China talks. Trump insinuated that a trade deal was close and his comments were echoed by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. A spokesman for China’s Ministry of Commerce said that the "two sides had reached a consensus." However, enthusiasm was tempered when Trump commented about Hong Kong unrest.
Wall Street continues to rack up record closes, and that fueled Asia and European stock market gains overnight, in part due to hopes for a Phase 1 trade deal. FX traders are less impressed. China is Australia’s largest trading partner and the Australian dollar is an obvious beneficiary from an easing of trade tensions. However, a Phase 1 deal appears to be fully priced into the currency. AUD/USD sellers emerged today when Westpac Banking Corp lowered its 2020 Reserve Bank of Australia (RBA) interest rate forecast. The bank now expects the RBA to cut rates twice, to a low of 0.25%. The news supported the Canadian dollar due to AUD/CAD selling.
NZD/USD traded quietly, and traders ignored the release of the Reserve Bank of New Zealand Financial Stability Report and October trade data.
EUR/USD trade sideways and GBP/USD is tracking UK election polls with trading action reduced ahead of U.S. Thanksgiving.
The impact of today’s U.S. data dump is expected to be marginal because of the Thanksgiving holiday.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
