The Canadian dollar drifted modestly lower overnight and is testing resistance which, if broken, will send it tumbling further. Traders are ignoring West Texas Intermediate (WTI) oil price levels which are still close to their 2019 peak and watching CAD/USD interest rate spreads.
The Canadian dollar isn’t the only currency stuck in a narrow range. The rest of the G-10 major currency pairs have suffered the same fate due to a lack of actionable, top tier economic data and inertia due to geopolitical risks.
Brexit has dominated trading for the past two weeks. Despite volumes of rhetoric and parliamentary votes, nothing has changed. The U.K. wants to avoid a "no-deal" Brexit but also wants changes to Prime Minister Theresa May’s Brexit deal. The European Union is satisfied with May’s deal and not eager to reopen negotiations.
In Asia, AUD/USD and NZD/USD got a boost after comments from President Trump about the state of China and U.S. trade talks. Trump said the U.S. and China had agreed to a lot of the most challenging points, but there was still work to do. Then he added "This is an epic deal, historic - if it happens. This is the Grand Daddy of them all, and we'll see if it happens. It's got a very good chance of happening.”
Nevertheless, the Antipodean currency gains were shallow because traders already knew that both sides were making progress and that a meeting between Trump and China President Xi Jinping is scheduled for some time in the next month.
EUR/USD has been rangebound inside a narrow $1.1220-$1.1235 band needing a break above $1.1260 or below $1.1170 to provide direction for the next 0.0100 points.
FX markets are patiently awaiting this mornings release of the US March non-farm payrolls data and the Canadian employment report.
Non-farm payrolls are expected to show that the U.S. added 180,000 new jobs, rebounding from February’s poor 20,000 gain. The February data was reportedly distorted due to lousy weather and lingering effects from the U.S. government shutdown. An increase of 220,000 or higher would suggest reduce fears of a looming recession and suggest that the weak Q1 data that has been seen won’t carry forward into Q2. U.S. dollar strength on higher than expected NFP data will be limited if Average Hourly Earnings are rise less than 0.2%.
The Canadian employment report is expected to be very weak. Forecasts are for just 1,000 new jobs while the unemployment rate stays unchanged. A weak report should only have a limited negative impact on the Canadian dollar because it is following a series of robust data.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
