USD/CAD broke critical support at $1.2930, but follow-through selling lacked conviction, and prices rallied to $1.2985. Arguably, thin, year-end markets, and a wobble in crude prices, exacerbated the move.
The Canadian dollar was a tad more subdued overnight, trading in a narrow band and closely tracking broad US dollar moves. Statistics Canada releases November Housing Starts (forecast 215,000), and Manufacturing Sales (forecast 0.6%) but the data will not be a factor for FX markets. Neither will Bank of Canada Governor Tiff Macklem’s speech at the end of the day, unless to radically diverges from the low-rates-for-a-long-time message.
GBP/USD is on a tear in early Toronto markets. GBP/USD was under pressure in Asia and early European trading.
Prices slid from Monday’s close of $1.3330 to $1.3282 by mid-morning in London. Then they reversed course and climbed to $1.3396 in Toronto. The gains were precipitated by headlines citing "sources" suggesting European Union officials believed "tentative" progress made in the trade talks. Nevertheless, GBP/USD remains a Brexit crapshoot.
EUR/USD is trading with a cautiously bullish bias. The EUR/USD technicals are bullish while prices are above $1.2040. Analysts and traders are predicting broad U.S. dollar weakness in 2021 on the back of ultra-low U.S. interest rates, a stubbornly dovish Fed, and hopes for a post-pandemic boom. However, at the moment, the surge in COVID-19 infections and restrictive measures implemented to counter the spread is capping gains.
USD/JPY traded narrowly, with a negative bias due to soft U.S. Treasury yields, bearish technicals, and mild safe-haven demand for yen.
AUD/USD traded erratically in a $0.7509-0.7549 range. The Reserve Bank of Australia minutes from the December meeting were released, but they did not offer anything new, so traders ignored them. However, they didn’t ignore China trade developments. The Global Times reported that Beijing is restricting Australian coal imports, in favour of supply from Russia, Indonesia, and Mongolia. China continues to be incensed over Australia’s call for an International Inquiry into the COVID-19 outbreak, considering it an attack on China’s integrity.
There are only second-tier U.S. economic reports due today, and they will be ignored. Traders will continue to track U.S. budget talks and equity price movements.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
