USD/CAD -Canadian dollar Flirting with Resistance

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The Canadian dollar sank like a rock on Friday, and it is still submerged today. FX markets started the week on a flat note due to a rash of risks looming in the coming days. Not only that, traders were a tad nervous around the inflammatory rhetoric between the U.S., Iran, with the U.K. putting in its two cents.

The U.K. said the believed the American’s claims that Iran was behind last week’s attacks on two oil tankers. Iran’s denials fell on deaf ears. The Middle East was only one area of concern. Hong Kong’s protests continued on the weekend. People are upset about plans for new legislation to make it easier for China to extradite Hong Kong citizens. Fears of a heavy-handed response by mainline China curtailed trading enthusiasm.

AUD/USD traded with a bearish bias. Traders are awaiting the minutes from the June 4 Reserve Bank of Australia meeting. They hope to garner more insight into the central bank's intentions following the cut in interest rates to a record low of 1.25%. NZD/USD was the only G10 major currency to post a gain, in part due to AUD/NZD selling.

USD/JPY consolidated Friday’s gains and opened near session highs. Prices are supported by higher U.S. Treasury yields and Friday’s U.S. retail sales data which suggested the Federal Reserve would leave interest rates unchanged this week.

The Federal Open Market Committee policy meeting is Wednesday. It is expected to leave rates where they are but to signal a rate cut in July.

U.K. political drama continues to weigh on GBP/USD. Boris Johnson, who is on record for saying the U.K. should not be afraid of leaving the EU without a deal, is the leading candidate to replace Theresa May. GBP/USD traded a $1.2573-$1.2597 band

West Texas Intermediate (WTI) oil prices are bouncing in a $51.50 U.S./barrel-$54.00/b range and are trading at $52.00/b. Prices are supported by concerns of supply disruptions if the Iran/U.S. feud escalates as well as expectations for an extension to the Organization of the Petroleum Exporting Countries/Russia production cuts. Fears that rising U.S. production and slowing global growth will create another supply/demand imbalance cap gains.

The Canadian dollar is a bystander in the global arena. That may change later in the week when Canadian inflation and Retail Sales reports are released. Headline Consumer Price Index is expected to rise 2.2% in May, compared to 2.0% in April. Retail Sales are forecast at 0.9%, m/m in April.

FX trading is likely to be a tad subdued today because of a lack of actionable economic data and the usual caution ahead of the Federal Open Market Committee meeting.

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