The Canadian dollar continued to track U.S. dollar sentiment in quiet, but cautious trading overnight. Asia markets traded with a risk-averse bias while European traders opted for a more positive outlook. Japan’s Nikkei 225 index fell 2.30%, leading Asia equities lower. European traders were positive, and Germany’s DAX is leading the rest of the major bourses higher, although the gains are small.
News of over 242,000 new U.S. coronavirus cases in the past six days is keeping FX traders on the defensive. States that reopened early and had lax social-distancing and mask-wearing measures were the hardest hit. Texas Governor Greg Abbott closed bars across the state as local hospitals were approaching capacity.
European traders appear to be discounting the US outbreak, as a "made-in-America" problem. The EU is even considering banning U.S. travelers. EU COVID-19 cases are on the decline.
EUR/USD is trading with a firm undertone, after testing but failing to break support at $1.1170 last week. Today’s break above $1.1230, accelerated the rise to $1.1280. News of better than expected EU Business Climate sentiment and the German Parliament passing a stimulus plan underpinned gains.
GBP/USD was under pressure last week and that didn’t change today. The currency pair traded higher in Asia but reversed course in Europe on concerns of a "hard-Brexit." U.K. and EU trade talks resume today. Prime Minister Boris Johnson said that he is prepared to accept an "Australia terms” deal, which is a series of mini-trade deals. GBP/USD technicals are bearish, targeting $1.2230 while prices are below $1.2390.
USD traded in a 107.05-107.37 range. Prices climbed alongside EURUSD gain, but renewed U.S. coronavirus fears are acting as a drag on gains.
FX traders are cautious, and not only because of fresh COVID-19 concerns. Federal Reserve Chair Jerome Powell testifies before Congress, and the minutes from the June 10 Federal Open Market Committee meeting are released on Wednesday. Traders expect the minutes and Powell will continue to emphasize downside risks to the U.S. recovery.
The Canadian dollar is on the defensive. USD/CAD broke above resistance at $1.3680 on Friday and reached $1.3714, before retreating.
However, as long as prices remain above the $1.3630 area, the focus is on additional gains to $1.3850.
Today’s U.S. and Canadian economic reports will not be trading factors.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
