USDCAD open 1.3485-89, Overnight Range: 1.3467-1.3535, WTI open $41.68, Gold $1824.08
- Canadian dollar rides the rally bus, as positive risk sentiment sinks US dollar
- EU Summit ends with budget and COVID-19 Relief deal
- COVID-19 vaccine hopes swap rising coronavirus fears.
The Canadian dollar is in demand. So are all the other G-10 majors. Traders have rushed to sell US dollars in the aftermath of the European Union’s acceptance of the COVID-19 Relief Fund proposal, and hopes for a coronavirus vaccine breakthrough.
The EU agreed to a multi-year €1.07 trillion budget, covering the years 2021 to 2027. The big news was they decided to open the door to issuing debt. They agreed to a €750 billion COVID-19 Relief Fund comprised of €390 billion in grants and €360 billion in low-interest loans.
EURUSD chopped about in a 1.1424-1.1469 range following the news.
Some economists expect further gains ahead as the focus will shift to the US massive deficit and election.
Other analysts expect EURUSD to retreat, saying all the good news is priced into the currency.
GBPUSD rallied alongside EURUSD gains but much more forcefully. Prices are supported by increased expectations for a COVID-19 vaccine, and by soaring global stock markets. Germany’s DAX index has returned to positive territory, and the US NASDAQ continues to make new highs.
FX risk sentiment is also favourable because of US government plans for another stimulus package-the fifth since the pandemic began. Naturally, Republicans and Democrat positions are far apart, but just the fact they are talking about a plan has fueled “risk-on” sentiment.
In Asia, AUDUSD and NZDUSD were bolstered by the shift to risk-seeking. AUDUSD got an added lift from the Reserve Bank of Australia minutes from the July 7 meeting. The RBA minutes confirmed that monetary policy would remain unchanged for a long time.
AUDUSD got additional support from the following statement: “Members agreed that negative interest rates in Australia remain extraordinarily unlikely. They also agreed there is no case for intervention in the foreign exchange market, given its limited effectiveness when the exchange rate is broadly aligned with its fundamental determinants, as at present.” AUDUSD rallied from 0.7018 to 0.7086.
The Canadian dollar climbed on the back of widespread US dollar selling. The USDCAD technicals turned bearish with the break below support in the 1.3480-1.3505 area and are looking for further losses to 1.3410, with a steeper drop to 1.3310 possible.
Today, Canada May Retail Sales are expected to rise 20%.
Weaker than expected results may act as a drag on Canadian dollar gains, while better than expected results, may be ignored.
The US economic calendar is light, leaving Wall Street to provide FX direction.
