USDCAD Open (6:00 am) 1.3374-78 Overnight Range: 1.3373-1.3418, WTI open $42.27, Gold $1882.50
• Canadian dollar approaching key resistance level
• US dollar bears are in control as greenback remains on the defensive
• US COVID-19 cases continue to rise
Canadian dollar demand picked up overnight. Part of it was due to AUDCAD selling following the Australian budget announcement, but it was mostly because of broad US dollar weakness against the major G-10 currencies.
USDCAD traded at 1.3599 in Asia on Monday and hit 1.3373 this morning, for a 1.7% loss. The Canadian dollar may be getting a slight benefit from contrasting coronavirus case outbreaks between Canada and the United States. The US announced 68,947 new cases on Wednesday. Canada had 540.
The Canadian dollar is also benefitting from concerns about the ballooning US budget deficit, which is over $3.0 trillion, expected to increase by a third if the next stimulus package is approved. Traders have embraced a “risk-on” world. Global equity markets continue to plow higher.
Yesterday, Tesla and Microsoft quarterly earnings met expectations. Asia and European equity indexes extended gains, and US equity futures point to a positive open for Wall Street this morning.
The weaker US dollar gave oil prices a lift. West Texas Intermediate, the North American benchmark climbed to $42.34/barrel from $39.90 on Monday. Gains may be limited. The US Energy Information Administration reported crude inventories rose 4.9 million barrels in the week ending July 17, which is nearly 20% above its five-year average.
The recent surge in US COVID-19 cases will also put a damper on demand due to renewed restrictions.
The Canadian dollar may also be getting a bit of a lift from the nearly 13% surge in gold prices since the start of June. XAUUSD rose from $1671.00 on June 5 to $1888.56 today. Canada is the fifth largest gold producer in the world.
Today’s Jobless Claims report may be worse than expected due to the resurgence of the coronavirus in many US states, forcing officials to shutter previously opened businesses. A larger than expected increase could bring the equity market and risk-on rallies to a halt.
EURUSD got within spitting distance of 1.1600 (1.1597) and then shied away, although prices may just be regrouping for another attempt. For some reason “big figures” give traders pause and this big figure represents the 50% Fibonacci retracement level of the 2018-2020 range (1.0653-1.2540).
The downside may be limited due to ballooning US government deficits and coronavirus concerns.
GBPUSD traded in a 1.2700-1.2753 band and is trading at 1.2714 in NY. The currency pair underperformed against the Euro due to ongoing concerns that UK rates could drift into negative territory and on fears that the EU and UK trade talks will fail.
Other than jobless claims, the US data calendar is empty.
