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USD-/ CAD - Canadian dollar bouncing off resistance

- Debt ceiling suspension bill passed by Senate.

= Nonfarm payrolls expected to rise by 190,000.

- US dollar consolidating losses-CAD rises 1.1% from yesterday’s open.

USDCAD snapshot: open 1.3564-68, overnight range 1.3409-1.3448, close 1.3448, WTI $71.09, Gold $1980.54.

The Canadian dollar rallied strongly yesterday, caught up in the whirlwind of the rapidly retreating US dollar against major G-10 currencies. It consolidated those gains overnight.

The big story is that the US Senate passed the debt ceiling bill by a vote of 63-36 and ended the drama about a US debt default.

Asian equity indexes roared higher. Hong Kong’s Hang Seng index surged 4.02%, Japan’s Nikkei gained 1.21% and Australia’s ASX 200 climbed 0.40%. European bourses followed suit with the German Dax rising 1.12%. S&P 500 futures are 0.51% higher.

The US dollar plunged yesterday thanks to the “skip/pause” chatter. It remains under pressure today ahead of the highly anticipated US nonfarm payrolls report. Many analysts suggest that NFP would have to rise substantially higher than the 190,000 forecast to dissuade the Fed from skipping a hike on June 14.

EURUSD rallied hard yesterday, rising from 1.0662 to 1.0767, then consolidated gains in a 1.0759-1.0778 range overnight. The reversal of long EURUSD positions entered into because of fears of a US debt default and hope the Fed has reached its terminal rate, supported the move. The EURUSD technicals turned bullish with the break of the May downtrend line at 1.0720, suggesting further gains to 1.0810. A topside break will extend gains to 1.0920.

GBPUSD soared from 1.2404 to 1.2538 yesterday then traded in a 1.2522-1.2543 range overnight. GBPUSD got an added lift due to contrasting Eurozone and UK inflation reports. UK inflation was hotter than expected while the Eurozone data showed a steep drop in CPI in May (actual 6.1% y/y vs 7.0% in April). EURGBP selling underpinned GBPUSD. A decisive break above 1.2550 targets 1.2650.

USDDJPY traded in a 138.61-139.10 range overnight. The currency pair is on the defensive after the US 10-year Treasury yield dropped from 3.82% on Tuesday to 3.617% today.

AUDUSD traded firmer, rising from 0.6672 in Asia to 0.6632 in early NY. The gains are an extension of yesterday’s rally and supported by the end of the US debt default fears, a rebound in the Chinese yuan (CNY), and renewed risks that the RBA hikes rates next week.

US Nonfarm payrolls are expected to rise by 190,000 and the unemployment rate to tick up to 3.5% from 3.4%.