USD/CAD - Canadian Dollar Consolidates Yesterday's Gains

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The Canadian dollar sank yesterday, and continued to slide overnight. USD/CAD bears were thwarted when they attempted to break below support in the $1.3490-00 area on Thursday. The subsequent bounce above $1.3550, triggered stop-loss demand and gains extended overnight.

Falling crude oil prices exacerbated the Canadian dollar selloff. West Texas Intermediate, the North American benchmark dropped from Thursday’s peak of $40.05/barrel to $38.56 during the European session. The International Energy Agency (IEA) updated forecasts today, predictions 2020 oil demand would increase by 400,000 barrels per day. They hedged their guess by saying that COVID-19 flareups skewed risks to the downside. WTI prices bounced in early New York trading and are sitting at $39.00/barrel.

Canadian dollar traders are waiting for the release of the monthly Labour Force Survey, released by Statistics Canada. Economists are forecasting 700,000 more jobs in June as COVID-19 restrictions were eased. Better-than-expected data could spark a renewed Canadian dollar rally.

The high number of new U.S. COVID-19 cases, a rise in new coronavirus cases in Tokyo, combined with healthy gains in stock markets, sparked a profit-taking-fueled shift into safe-haven trades yesterday and overnight. that the risk aversion fears have eased, somewhat, in early Toronto trading. New York opened with additional U.S. dollar gains against the commodity currencies, firmer JPY, and higher gold prices, while remaining close to flat against GBP and CHF.

Asia equity indexes closed with losses. European bourses were down during the European morning, but have turned positive in early NY trading. U.S. futures are still modestly negative.

European markets were watching developments from the EU Council meeting. The Council proposed a €1.07-trillion budget and left the Recovery fund proposal at €750.0 billion. They also found room for a €5.0-billion reserve to help mitigate damages caused by Brexit.

EUR/USD continues to bounce in its well-defined $1.1170-$1.1360 range. The single currency is underpinned a softer USD/CNY, but gains are capped by EUR/GBP selling, and a lack of fresh direction from the European Union and European Central Bank.

GBP/USD dropped in Asia and tested support from the intraday uptrend line at 1.2570. It held.

Prices are trading at 1.2615 in New York, buoyed by reports that U.K. Prime Minister Boris Johnson, told EU and U.K. chief negotiators he wanted an "outline" Brexit agreement this summer.

U.S. Producer Price data is due today, but it won’t be a factor for FX markets.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates