Canadian Dollar Update June 7, 2019 – Canadian Dollar surging

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USD/CAD Open: 1.3277-1.3278 Overnight Range: 1.3276-1.3375

The Canadian dollar was rangebound in overnight currency exchange markets. Oil is at $53.35 and gold is at $1,345. US markets are higher today.

The short-term USD/CAD technicals are neutral-bullish. For today, USD resistance is at 1.3341. Support is at 1.3235.

The Canadian dollar is on the move. It surged 1.6% since last Friday after financial markets reassessed their outlook for US interest rates. Prices got an added lift when oil prices bounced off of lows last seen in February.

St Louis Fed President, James Bullard, became the first FOMC voting member to suggest the Fed may need to cut rates, in a speech on Monday. He warned that a rate cut would be warranted soon to help avert a sharper than expected slowdown. Markets got really excited after Fed Chair, Jerome Powell, appeared to support Mr. Bullard’s view when he said “I’d like first to say a word about recent developments involving trade negotiations and other matters. We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labour market and inflation near our symmetric 2 percent objective”.

Wall Street soared on the news and led global equity indices higher. The US went on the defensive and is poised to finish the week with losses against all the G-10 major currencies except against the Japanese yen.

The Canadian dollar is also underpinned by a rebound in West Texas Intermediate (WTI) oil prices from Wednesday’s $50.65 low. Prices touched $53.81 in Europe overnight following comments from Saudi Arabia Oil Minister, Khalid al-Falih. He was speaking a conference in Russia and said that Brent (European benchmark) oil prices needed to be above $60.00/b to attract investment. He also suggested that OPEC was willing to “roll-over” existing production cuts until the end of the year, but they still needed to get non-OPEC countries onboard.

Oil prices have been rising and falling on changes in global growth sentiment. Prices were undermined on fears that a prolonged China/US trade war would exacerbate a global growth slowdown. Those fears worsened when President Trump threatened to impose 5% tariffs on all Mexico imports unless they addressed the illegal immigration issue. A Ford Automotive executive said the tariffs would have a significant impact on the auto industry. If so, US economic growth would suffer. Oil prices rebounded on news that Mexico was making progress on the US demands. However, the risk that the tariffs are imposed will weigh on sentiment.

Traders are waiting for today’s US employment report. Nonfarm payrolls are expected to rise 185,000, with a bump to 0.3% from 0.2% in average hourly earnings. The US dollar may come under selling pressure if the report is weaker than forecast as it could encourage a Fed rate cut sooner than expected.

Canadian employment data is also on tap. The forecast is for a gain of 8,000 jobs, well below last month’s 106,500 result. A soft report will be dismissed as “Payback” for the April data.

Today’s Suggested Range USD/CAD: 1.3230 – 1.3330

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