USD/CAD - Canadian Dollar Sinks as Oil Rises

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The Canadian dollar is on the defensive. Crude prices are rising, but the Canadian dollar is sliding as the focus shifts to this morning’s U.S. data dump and Wednesday’s Federal Open Market Committee meeting. The Canadian dollar is tracking broad U.S. dollar strength as positions get adjusted ahead of the meeting.

West Texas Intermediate (WTI) oil opened in New York, where it closed yesterday, but climbed steadily since, rising to $71.52 U.S./barrel. Oil prices are supported by ongoing speculation that the post-pandemic global economic recovery will increase crude demand. Oil price gains should help limit Canadian dollar losses.

The European Union and U.S. are putting an end to the Boeing and Airbus subsidy dispute, which led to punitive tariffs from both sides.

The U.K. announced a trade deal with Australia. U.K. Prime Minister Boris Johnson said, Our new free trade agreement opens fantastic opportunities for British businesses and consumers, as well as young people wanting the chance to work and live on the other side of the world." FX traders ignored the news.

Global equity indexes are higher, except those in China. Hostile G-7 rhetoric aimed at Beijing weighed on Chinese stock prices. European equities are at record highs, and Wall Street is poised to open in positive territory.

EUR/USD traded in a $1.2115-$1.2147 range overnight and is sitting at 1.2122 in New York. Traders ignored Eurozone economic data and dovish European Central Bank-speak . German HICP inflation was 2.4% y/y, as expected while the Eurozone trade surplus narrowed in April.

For today, EUR/USD support is at $1.2090 while Resistance is at $1.2150.

GBP/USD had a choppy overnight session. It rallied from $1.4106 at the close to $1.4127 at the European open, then dropped to $1.4073, just before the New York open. The U.K. unemployment slipped to 4.7%, as forecast, but the outlook is murky as furlough schemes end in September. The intraday GBP/USD technicals are bearish below $1.4130, looking for a break below $1.4070 to target $1.4000.

USD/JPY rallied from 109.60 yesterday to 110.16 at the New York open, then retreated to 110.00. Prices are underpinned by firmer U.S. Treasury yields and a report the Bank of Japan may extend pandemic relief measures for another six months.

U.S. Retail Sales, Producer Price Index, Industrial Production, and Capacity Utilization data are ahead.

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