The Canadian dollar started today’s session near to where it ended yesterday. USD/CAD traded in a narrow $1.2765-$1.2795 range overnight, then poked above $1.2800 in early New York trading, coinciding with EUR/USD hitting a $1.2007 bid.
The Canadian dollar is deriving some support from firm West Texas Intermediate oil prices. They are at $55.21 today, a level last seen in February 2020. Prices have risen over 60% since the lows seen last October. Some analysts believe that the combination of reduced U.S. crude inventories, and Saudi Arabia production cuts by Saudi Arabia and the Organization of the Petroleum Exporting Countries will support prices as rebounding economies fuel demand.
Equity risk sentiment continues to be positive and bolstered by ongoing U.S. COVID-19 stimulus relief talks, and quarterly earnings reports. The major Asia equity indexes closed with robust gains, and European bourses are in positive territory but below their earlier peaks. Wall Street is poised to open on a mixed note. The DJIA is flat while S&P 500 futures are modestly higher. Oil prices gained while gold prices fell.
EUR/USD traded negatively in a $1.2006-$1.2049 range, with the low made in early New York trading. There are sizeable option contracts with strikes in the 1.1990-1.2000 level expiring this morning which should continue to attract sellers. The Eurozone economy is still weak as evidenced by today’s data, even though the results beat expectations. January inflation rose 0.9% y/y (forecast 0.5%), December Producer Prices were -1.1% y/y (forecast -1.2%), and Services Purchasing Managers Index was 45.4 compared to 45.0 last month.
Italian political drama is providing a distraction. Italy President Sergio Mattarella asked former European Central Bank President Mario Draghi if he is interested in becoming Prime Minister, and form a new government. Draghi is credited with saving the Euro back in 2012. Can he save Italy? EUR/USD technicals are bearish, looking for a break below $1.2010 to extend losses to $1.1920.
GBP/USD failed to break above $1.3680 overnight despite two attempts. Prices are currently at $1.3620, with traders adjusting positions ahead of tomorrow’s Bank of England monetary policy meeting. U.K. January Services PMI was 39.5, with the soft result blamed on the effects of lockdowns.
AUD/USD is trading in the middle of its $0.7605-$0.7625 range. Comments from Reserve Bank of Australia Governor Phillip Lowe support prices. He said, "It is going to be some years before the goals for inflation and unemployment are achieved. So, it is premature to be considering withdrawal of the monetary stimulus."
Today’s U.S. data includes Institute for Supply Management Services PMI and ADP employment.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
