USD/CAD - Canadian Dollar Looking for Direction

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The Canadian dollar traded sideways overnight. Global risk sentiment turned negative after Asia equity traders ignored Wall Street price action and focused on rising American coronavirus cases. A surge in COVID-19 cases since July 1 forced some states to reimpose restrictions, including mandatory face coverings inside buildings.

Asian equity indices closed lower, except in China, where the Shanghai Shenzhen CSI index added 0.60% to yesterday’s 5.7% gain. European bourses are lower across the board, and S&P 500 futures suggest a negative open on Wall Street.

EUR/USD has recouped a small portion of its overnight losses in early Toronto trading. The single currency fell from $1.1331 to $1.1260 before inching higher to $1.1285. Traders ignored data and European Union Commission forecasts. German Factory orders rose 7.8% m/m in May, well above the 17.5% plunge in April. The EU Commission released its Summer 2020 Economic Forecast. It was bleak. It downgraded Gross Domestic Product growth to -8.7% (it was -7.7 in Spring forecast), blaming the revision on a worse than expected economic impact from the coronavirus.

GBP/USD tracked EUR/USD moves with intraday technicals modestly bullish while prices are above $1.2460.

Traders are looking for a break above the $1.2550-70 to revisit the July peak of $1.2805. However, ongoing concerns about the state of the EU/UK trade talks are acting as a drag to topside moves.

USD/JPY didn’t appear to suffer from safe-haven demand. Prices inched higher overnight, trying to break resistance at 107.70 to spark another up-leg to the current rally. Steady U.S. Treasury yields and hopes for a robust global economic recovery are underpinning prices.

AUD/USD did not get any support from the Reserve Bank of Australia monetary policy meeting. That is because the results were expected. Instead, traders took their lead from souring risk sentiment and drove AUD/USD down from $0.6996 to $0.9624. Prices have since bounced and are trading in Toronto at $0.6942.

The Canadian dollar continues to be at the mercy of broad U.S. dollar sentiment with domestic data, and Bank of Canada (BOC) updates ignored by traders. Yesterday the BOC released its quarterly Business Outlook Survey (BOS).

It wasn’t pretty. The BOS said "Results from the summer Business Outlook Survey suggest that business sentiment is strongly negative in all regions and sectors due to impacts from the COVID-19 pandemic and the drop in oil prices. Firms reported that weak demand is reducing both capacity pressures and expectations for price growth."

Canada IVEY Purchasing Managers Index data is due today, but it won’t be a factor for traders.

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