Love is in the air, and the Canadian dollar is feeling it. The loonie continues to probe resistance in the 75.50 cent area (U.S. cents per one Canadian dollar). The currency is being supported by broad U.S. dollar losses against the other commodity bloc currencies, even though lingering coronavirus fears are underpinning the safe-haven currencies.
The overnight price action was subdued as traders were content to book profits ahead of the U.S. long weekend. U.S. markets are closed on Monday for Presidents' Day.
The Canadian dollar is deriving a modicum of support from the rebound in oil prices. West Texas Intermediate (WTI) bottomed out at $49.40 U.S./barrel on Monday and touched $52.25 U.S. overnight, a gain of 5.08%. USD/CAD dropped from $1.3325 to $1.3240 during that period.
Oil traders are hoping that the China coronavirus will only have a short-lived impact on China’s oil demand, allowing crude prices to rebound. Their optimism may be misplaced as the Organization of the Petroleum Exporting Countries, and the International Energy Agency (IEA) forecast lower global demand in Q1 2020.
Yesterday’s U.S. inflation data didn’t do anything to shift analysts from their "Steady Fed" view. The Federal Reserve expects inflation to rise toward its 2.0% target, and until it does, U.S. rates will remain unchanged.
EUR/USD is under pressure. A spate of weak Euro-area economic data reports underscores the lack of growth in the eurozone economy, which contrasts sharply, with U.S. economic results. Recent data paints a negative picture of the eurozone economy.
The German economy is stagnating.
German Q4 Gross Domestic Product rose 0.3%, y/y compared t0 1.1% previously. The eurozone economy grew a mere 0.1% in Q4. That’s the weakest result since 2013. However, eurozone employment growth ticked higher. EUR/USD is in a downtrend with a decisive break below $1.0840, targeting further losses to $1.0770.
GBP/USD consolidated Thursday’s gains in a $1.3021-$1.3062 range, overnight. Yesterday’s rally occurred after UK Prime Minister announced a cabinet shuffle, which didn’t include Chancellor of the Exchequer Sajid Javid. His resignation and the subsequent appointment of Rishi Sunak sparked GBP/USD demand as analysts suggest he will increase fiscal stimulus. GBP/CAD demand contributed to the narrow range seen in Canadian dollar trading.
USD/JPY is trading below 110.00 as lingering coronavirus fears and soft U.S. Treasury yields offset broad U.S. dollar demand against the commodity bloc currencies.
The Australian and New Zealand dollars are finishing the week on a positive note. Prices gained steadily until mid-week when they reversed course. NZD/USD still managed to hang on to some of its post-RBNZ monetary policy meeting gains, after the central bank adopted a less dovish outlook.
U.S. Retail Sales and Michigan Consumer Confidence Sentiment data will provide FX traders with direction this morning. There is a risk of pre-holiday weekend position squaring which could reverse some of this week's moves.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
