The Canadian dollar rally stumbled yesterday, and the currency retreated. USD/CAD probed support in the $1.2510 area yesterday and then retreated steadily, reaching $1.2573 in New York today. Renewed U.S. dollar demand against the major G-10 currencies and a drop in West Texas Intermediate oil to $57.70/barrel from $61.36/b yesterday fueled the USD/CAD gains.
The Canadian dollar downside may be limited due to expectations from spill-over benefits to Canada from the U.S. stimulus plans and rising numbers of Canadians that are getting COVID-19 vaccines. The Canadian dollar continues to be underpinned by the oil price outlook.
Analysts expect higher prices as global economic recovery spurs demand, despite plans by the Organization of the Petroleum Exporting Countries to phase out existing production cuts.
Europe returned from a four-day weekend, and traders promptly bought stocks.
The U.K. FTSE 100 has gained 1.29%, while Germany’s DAX is not far behind, rising 1.19%. Wall Street futures are modestly lower after closing at record highs yesterday.
Gold prices climbed 0.35%
EUR/USD is consolidating yesterdays gains. Prices are trading at the bottom of the $1.1796-$1.1821 overnight range, with higher than expected European Union unemployment numbers contributing to the retreat. The U.S. post-pandemic economic recovery fueled by massive U.S. stimulus plans and the high number of Americans that have received a COVID-19 vaccination contrasts sharply with the E.U., which is still dealing with COVID-19 lockdowns.
However, the short term EUR/USD technicals are bullish above $1.1760.
GBPUSD gave back all of yesterday’s gains when prices dropped from $1.3917 to $1.3819. GBP/USD support is at 1.3810, which, if broken, will extend losses to $1.3710.
USD/JPY traded in a 110.14-110.54 range with US 10-year Treasury yields at 1.704% underpinning prices.
The intraday technicals are bullish above 110.00, looking for a break of 110.90 to extend gains to the 112.00 area.
AUD/USD didn’t get any help from the Reserve Bank of Australia monetary policy meeting. AUD/USD tracked broad U.S. dollar sentiment while ignoring better than expected China Caixin Services Purchasing Managers Index and Composite PMI data. AUD/USD dropped to $0.7607 from $0.7660. The RBA left rates and monetary policy unchanged. The RBA is starting to get concerned about rising house prices. It said, “Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully, and it is important that lending standards are maintained." Perhaps the Bank of Canada will follow suit at the April 21 meeting.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
