The Canadian dollar came under pressure in Asia when West Texas Intermediate (WTI) oil prices plunged.
The American Petroleum Institute announced that U.S. crude inventories rose 11.93 million barrels in the week ending April 3, following the previous week’s increase of 10.48 million barrels.
WTI dropped from $24.60 U.S./barrel to $23.85/barrel on the news. Prices recovered quickly and reached $25.26/b just before Europe opened. USD/CAD climbed from 1.3993 to 1.4080 during that time.
USD/CAD traders in Europe ignored slumping crude prices and sold the currency pair on the back of minor profit-taking, as the greenback reversed its Asia gains.
COVID-19 headlines and individual governments fiscal and monetary policy responses to the pandemic continue to drive FX markets, and price moves are exaggerated by lower than usual liquidity.
Japan was the latest government to step up to the plate. Yesterday, they detailed their fiscal stimulus plans, which were leaked earlier. A Reuters article suggests that the Bank of Japan will forecast a 2.1% economic contraction in 2020. Markets took the news in stride as global economic weakness from the pandemic is not a surprise. USD/JPY bottomed out in Asia at 108.52 and opened in Toronto at 108.85.
AUD/USD got slammed early when S&P rating agency downgraded Australia’s debt from AAA to triple A negative. AUD/USD dropped to $0.6117 from $0.6170 but fully reversed the loss during the European session. NZD/USD drifted lower initially but managed to open in Toronto with only a small loss.
EUR/USD traded in a $1.0831-10901 band with traders unable to pick a direction. Prices inched higher into the Toronto open alongside U.S. equity futures punching into positive territory. However, gains were capped on disappointment that European Union finance ministers were unable to agree to a unified COVID-19 response. The U.K., Spain and France officials said that there weren’t any plans for lifting the coronavirus confinement measures.
GBP/USD is locked in a 1.2160-1.2460 band. Prime Minister Boris Johnson is the poster-child for the importance of self-isolation and social distancing after he became infected with COVID-19 because he insisted on shaking hands. GBP/USD gains are limited by uncertainty around the E.U./U.K. trade talks.
For today, USD/CAD support is at $1.3980 and $1.3920. Resistance is at $1.4040 and $1.4090. Today’s suggested range is $1.3970-$1.4050.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
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