Stretched Dollar Remains Firm

Sterling fell to new six-month lows while the euro recorded its lowest level since late March, and the Australian dollar fell to new lows for the year. Led by a 2% fall in the South African rand, with the bulk of the sell-off coming after the central bank kept policy rates unchanged, which is now lower on the year, most emerging market currencies weakened. The Russian rouble was the strongest in that space, though the lion’s share of the gains came before the central bank hiked its key rate by 100 bp to 6.5% ahead of the weekend.

The dollar had seemed to track short-term US interest rates until recently, and its strength has come in the face of softer rates. The implied yield of the December 2022 Eurodollar futures contract finished the week near 42 bp, down 13 bp over the past few weeks. The 10-year yield fell to about 1.125% before recovering to trade closer to 1.30% at the end of last week.

The dollar and interest rates are behaving as one would expect in a risk-off environment. The contagious Delta variant appears to be dampening activity economic activity in Australia, Japan, and parts of Europe. Several US states are recording multi-month highs in cases, and weekly initial jobless claims unexpectedly rose to their highest level in two months (in the week through July 16).

Floods in Germany, Belgium, and China could also impact economic activity and prices. Droughts in North America may boost food prices and boost natural gas prices as an alternative for a decline in hydroelectric output. A freeze in Brazil sent coffee prices sharply higher, while wildfires in Canada saw lumber prices rise dramatically (almost 22% over the past three sessions) after trending lower in recent weeks.

On the other hand, equities are harder to fit into the risk-off narrative. Most of the large Asia Pacific equity market fell, but Europe’s Dow Jones Stoxx 600 rallied and will take a four-day advance into next week. The benchmark is within striking distance of the record high it set earlier this month. The S&P 500 and NASDAQ advanced and have only fallen in two of the past eight weeks. They are both poised to set fresh recorded highs.

Dollar Index

The Dollar Index recorded a key reversal in the middle of last week. After rising to its best level in three months (~93.20), it reversed lower and settled below the previous day’s low. Follow-through selling the next day took it to 92.50 and the 20-day moving average. It recovered by stalled near 93.00 before the weekend. Neither the MACD nor the Slow Stochastic confirmed the new high, but the underlying tone remains constructive and buying on dips seems stronger than the selling pressure into rallies. Moreover, the five and 20-day moving averages cross-over has caught the major moves this year since February, and the five-day average is still above the 20-day.

The year’s high was set in late March near 93.45. A break above there could target the high from early last November near 94.30, and the 94.50 area corresponds to the (38.2%) retracement of the drop since the panic-driven high in March 2020 near 103.00.

Euro

The downside momentum of the euro seemed to pause in recent days ahead of $1.1750. However, the bounces have been brief and shallow. The momentum indicators have not confirmed the recent lows. The risk is for a test on the year’s low set in late March near $1.1700, and a break of it could signal a return to the low set near $1.16 on the night of the US election last November.

The ECB’s lower for longer forward guidance could attract funds into the asset markets, but the euro itself is unloved, and speculators in the futures market are still scaling out of a net long position. A move above $1.1830, where the 20-day average is found, would lift the tone. The euro has not closed above the 20-day moving average since early June.

Japanese Yen

The dollar began last week testing JPY109.00, its lowest level since late May as the US 10-year note yield slumped below 1.20%. By the end of the week, the yield was back near 1.30%, and the greenback was around JPY110.60. It settled above its 20-day moving average (~JPY110.40) for the first time in a couple of weeks. The MACD and Slow Stochastic have turned up from oversold territory. Overcoming chart resistance near JPY110.65 could see a push above JPY111.00. The year’s high was set earlier this month near JPY111.65.

British Pound

Sterling fell to five-month lows near $1.3570 on July 20, just shy of the (50%) retracement of the rally from last November, found near $1.3550. In the second half of the week, a recovery attempt stalled near $1.3785 in front of the 20-day moving average (~$1.38). This area presents an important technical hurdle, which overcoming would lift the tone. The momentum indicators look constructive as they try to turn higher. A move below $1.3680 warns of a return to the lows.

Canadian Dollar

The greenback reached 5.5-month highs against the Canadian dollar at the start of last week, near CAD1.28. It pulled back to the CAD1.2525 area before buyers re-emerged, and it consolidated mostly below CAD1.26. The MACD has turned down, as has the Slow Stochastic, without confirming the high. Still, a push back above the CAD1.2650 area could warn of another run at the highs. The 20-day moving average is near CAD1.25, and the US dollar has not closed below it since early June. Doing so now would likely confirm that a top is in place.

Australian Dollar

The elevated covid cases in Sydney and the weakest composite PMI (preliminary reading) since May 2020 (45.2) illustrate headwinds for the Australian economy. The minutes from last month’s RBA meeting showed that officials have a flexible stance toward bond purchases. It is likely to use that flexibility at its August 3 meeting to boost its bond purchases. Ahead of that, investors expect a jump in Australia’s Q2 CPI, with the headline rising above 3.5% year-over-year from 1.1% in Q1.

The underlying measures will likely firm toward 1.5%-1.6% from 1.1%-1.13%. The Aussie posted a key reversal in the middle of the week by falling to new lows for the year (~$0.7290) and then recovered to finish above the previous day’s high. Sellers were lurking in front of $0.7400 and drove it back to $0.7350 ahead of the weekend. The pre-weekend price action was poor, and the close was near session lows. The next important support area is near $0.7300.

Mexican Peso

Although the dollar set four-day lows ahead of the weekend, it still managed to close high (0.5%) on the week for the third consecutive week. The JP Morgan Emerging Market Currency Index fell for the fourth consecutive week and the sixth weekly fall in the past seven weeks. The greenback peaked against the peso in the middle of the week, slightly above the 200-moving average (~MXN20.21). Initial support now is seen near MXN19.95 and a stronger shelf in the MXN19.80-MXN19.83 area.

The Slow Stochastic is trending higher and is approaching overbought territory. The MACD has flatlined near the trough. In the slightly bigger picture, the dollar has mostly been confined to a range set on June 24 (~MXN19.7150-MXN20.2150).

Chinese Yuan

The US dollar posted a minor gain of about 0.15% against the yuan ahead of the weekend to secure another weekly advance. The advance covers the last eight weeks without fail. While that is statistically true and no doubt has not been lost on official and private observers, it is also true that the greenback has been mostly in a CNY6.45-CNY6.50 range. Rather than see a depreciation of the yuan, it has gone essentially nowhere.

The dollar has not traded above the high set in late June near CNY6.4910 this month, though it was approached a couple of times. It is also true that the yuan’s 0.7% gain against the dollar this year make it one of the strongest emerging market currency so far this year and stronger than all the major currencies but the Canadian dollar (~1%). Moreover, by focusing on the eight-week decline of the yuan against the dollar, one misses the fact that the yuan is at five-year highs on a trade-weighted basis (CFETS).

This article was written by Marc Chandler, MarctoMarket.

The Week Ahead – Corporate Earnings, Economic Data, the FED, and COVID-19 in Focus

On the Macro

It’s busier week ahead on the economic calendar, with 71 stats in focus in the week ending 30th July. In the week prior, just 33 stats had also been in focus.

For the Dollar:

Core durable goods and consumer confidence figures will be in focus on Tuesday. While both sets of numbers are key, consumer confidence should have the greater influence.

On Thursday, 2nd quarter GDP numbers are due out alongside weekly jobless claims data.

While 2nd quarter GDP numbers will be the key driver, another increase in claims would overshadow any positive GDP numbers.

At the end of the week, personal spending and consumer sentiment figures will also draw attention.

In the week ending 23rd July, the Dollar Spot Index rose by 0.24% to 92.912.

For the EUR:

It’s a busy week on the economic data front.

Early in the week, the German economy will be back the spotlight.

German business and consumer sentiment and unemployment figures will be in focus in the 1st half of the week.

On Friday, the focus will then shift to 2nd quarter GDP numbers for France, Germany, and the Eurozone.

Throughout the week, member state and Eurozone prelim inflation figures for June will also draw attention.

For the week, the EUR fell by 0.30% to $1.1771.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

Economic data is limited to housing sector data that should have a limited impact on the Pound.

A lack of stats will leave the Pound in the hands of COVID-19 news updates in the week.

The Pound ended the week down by 0.14% to $1.3748.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

Inflation figures are due out on Wednesday ahead of GDP numbers on Friday.

While both sets of numbers will influence, market risk sentiment and crude oil pries will remain the key driver. Rising COVID-19 cases continue to threaten to derail the global economic recovery and weigh on demand for crude oil.

The Loonie ended the week up 0.39% to C$1.2564 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Consumer and wholesale inflation figures are due out in the week.

While wholesale inflation will influence, expect consumer inflation figures to be key.

Away from the economic calendar, any new COVID-19 containment measures would further test Aussie Dollar support.

The Aussie Dollar ended the week down by 0.47% to $0.7366.

For the Kiwi Dollar:

It’s a quiet week ahead. Early in the week, stats are limited trade data. Late in the week, consumer confidence numbers will also be in focus.

While positive numbers will provide the Kiwi with support, market risk sentiment will influence.

Any further signs of a slowdown to the global economic recovery and expect the Kiwi Dollar to come under pressure.

The Kiwi Dollar ended the week down by 0.36% to $0.6974.

For the Japanese Yen:

Early in the week, private sector PMIs for July will be in focus.

Both sets of numbers will draw plenty of attention ahead of a busy 2nd half of the week.

At the end of the week, retail sales and prelim industrial production figures will have a greater impact on the markets.

The Japanese Yen fell by 0.44% to ¥110.550 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

At the end of the week, NBS private sector PMIs from China will come into view. The numbers are due out next weekend.

The Chinese Yuan ended the week down by 0.03% to CNY6.4813 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…

Corporate Earnings

Among the big names from the U.S include Apple Inc. (Tues), Microsoft Corp. (Tues), and Amazon.com Inc. (Thurs).

The Weekly Wrap – Another Win for the Greenback as COVID-19 Raises the Alarm

The Stats

It was a quieter week on the economic calendar, in the week ending 23rd July.

A total of 33 stats were monitored, which was down from 66 stats in the week prior.

Of the 33 stats, 15 came in ahead forecasts, with 18 economic indicators coming up short of forecasts. There were no stats that were in line with forecasts in the week.

Looking at the numbers, 14 of the stats reflected an upward trend from previous figures. Of the remaining 19 stats, all 19 reflected a deterioration from previous.

For the Greenback, market concerns over the resilience of the global economic recovery delivered Dollar support. Economic data from the U.S was mixed, however, limiting the upside. In the week ending 23rd July, the Dollar Spot Index rose by 0.24% to 92.912. In the previous week, the Dollar had risen by 0.60% to 92.687.

Out of the U.S

The markets had to wait until Thursday for the first set of key stats.

Jobless claim figures disappointed. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

At the end of the week, prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily on the composite.

In the equity markets, the NASDAQ rallied by 2.84%, with the Dow and the S&P500 ending the week up by 1.06% and by 1.96% respectively.

Out of the UK

It was quieter week. On Thursday, CBI industrial trend orders disappointed, falling from 19 to 17. Economists had forecast a more modest decline to 18.

At the end of the week, retail sales and private sector PMI numbers were the key stats of the week, however.

In June, retail sales rose by 0.5% in June, partially reversing a 1.30% fall from May. Year-on-year, sales was up 9.7%, falling short of a forecasted 10.1% increase. In May, sales had been up by 24.6%.

Private sector PMIs were also disappointing. In July, the services PMI fell from 62.4 to 57.8, with the manufacturing PMI falling from 63.9 to 60.4.

As a result, the composite PMI fell from 62.2 to 57.7.

In the week, the Pound fell by 0.14% to end the week at $1.3748. In the week prior, the Pound had fallen by 0.96% to $1.3767.

The FTSE100 ended the week up by 0.28%, following a 1.60% loss from the previous week.

Out of the Eurozone

It was a quieter week.

Eurozone consumer confidence and French, German, and Eurozone private sector PMIs were in focus.

It was a mixed set of numbers, however.

Consumer confidence in the Eurozone waned in July, with the index falling from -3.3 to -4.4. Economists had forecast an increase to -2.6.

More significant, however, were the prelim PMI numbers for July.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

On the monetary policy front, the ECB left rates unchanged, which was in line with market expectations. ECB President Lagarde continued to deliver assurances to the markets, ultimately leading to a pullback in the EUR and supporting the European boerses on the day.

For the week, the EUR fell by 0.30% to $1.1771. In the week prior, the EUR had fallen by 0.59% to $1.1806.

The CAC40 rose by 1.68%, with the DAX30 and the EuroStoxx600 ending the week up by 0.83% and by 1.49% respectively.

For the Loonie

It was a particularly quiet week on the economic data front.

Retail sales figures were in focus on Friday.

In June, retail sales fell by 2.1%, following a 5.7% slide in May. Economists had forecast a 3.2% decline.

A sharp rebound in crude oil prices provided the Loonie with much-needed support, however.

Early in the week, the Loonie had visited $1.27 levels against the Greenback before finding support.

In the week ending 23rd July, the Loonie rose by 0.39% to C$1.2564. In the week prior, the Loonie had fallen by 1.33% to C$1.2613.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 23rd July, the Aussie Dollar fell by 0.47% to $0.7366, with the Kiwi Dollar down by 0.36% to $0.6974.

For the Aussie Dollar

It was a quieter week, with retail sales and RBA meeting minutes in focus.

Retail sales disappointed, falling by 1.8% in June. Economists had forecast a 0.6% decline following May’s 0.4% rise. The downside stemmed from a reintroduction of COVID-19 containment measures, as new cases spiked once more.

The RBA meeting minutes had a relatively muted impact on the Aussie Dollar early in the week.

COVID-19 and concerns over the sustainability of the economic recovery pegged the Aussie back.

For the Kiwi Dollar

It was a particularly quiet week, with no major stats to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was another relatively busy week.

Early in the week, inflation figures were in focus ahead of trade data on Wednesday.

Inflationary pressures returned in June, with Japan’s annual rate of inflation rising from -0.1% to 0.2%. The core annual rate of inflation ticked up from 0.1% to 0.2%.

In spite of the modest pickup, there was limited impact on the Yen. The numbers are unlikely to shift the BoJ’s stance on monetary policy.

On Wednesday, trade data was upbeat, with Japan’s trade balance rising from a ¥189.4bn deficit to a ¥383.2bn surplus. Year-on-year, exports were up 48.6% in June. In May, exports had been up by 49.6%.

The Japanese Yen fell by 0.44% to ¥110.55 against the U.S Dollar. In the week prior, the Yen had risen by 0.06% to ¥110.070.

Out of China

It was a quiet week on the economic data front, with no major stats from China for the markets to consider.

On the monetary policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 23rd July, the Chinese Yuan ended the week down by 0.03% to CNY6.4813. In the week prior, the Yuan had ended the week flat at CNY6.4792.

The CSI300 and the Hang Seng ended the week down by 0.11% and by 2.44% respectively.

USD/CAD Exchange Rate Prediction – USD/CAD Rises Slightly Despite Better than Expected Canadian Retail Sales

The USD/CAD moved higher but settle off the highs of the session following a better than expected Canadian retail sales report. The dollar gained traction despite a softer than expected Markit PMI report. Services fell the most, but manufacturing was also lower, as the hospitality business came under pressure in July as the spread of the delta variant resurfaced.

Technical Analysis

The USD/CAD moved higher, consolidating the losses experienced earlier in the week. Support is seen near the 20-day moving average at 1.2494. Target resistance is seen near the July highs at 1.2807. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a falling trajectory which points to a lower exchange rate.

Canadian Retail Sales Fall Less than Expected

Statistics Canada says retail sales fell by 2.1% to $53.8 billion in May, as many businesses remained close during the third wave of COVID-19. May retail sales were expected to show a 3.0% loss after a 5.7% drop in April. Sales decreased in eight of 11 subsectors for May. The largest declines in retail sales occurred in the building material and garden equipment and supplies sector, which saw an 11.3%.

U.S. Dollar Posts Second Week of gains Ahead of Fed Meeting

Some analysts wondered, though, whether the dollar’s recent rally might be losing momentum.

The dollar index, which measures the greenback against a basket of six major currencies, was slightly higher on the day at 92.873. For the week, it was up 0.1%, after rising 0.6% previously.

But that was off a 3-1/2-month high of 93.194 hit on Wednesday, bolstered by strong Wall Street earnings that helped investors regain some confidence in the midst of worries that the Delta coronavirus variant could derail the global recovery.

Risk appetite remained high on Friday, with the rise in U.S. stocks, the sell-off in Treasuries, gains in most commodity currencies, and the greenback coming off its peaks.

“Medium-term oscillators and momentum are in sync on the upside suggesting potential higher highs to come, such as 94.30-94.72 (on the dollar index),” said Dave Rosenberg, chief economist and strategist at Rosenberg Research.

He also cited the potential of a “Golden Cross” in the dollar index, a chart pattern in which the 50-day moving average crosses above the 200-day moving average, a bullish signal.

“Overall, the dollar(index) leans toward further upside which could add to recent pressure in commodity prices and other currencies. Support is at 92.00-91.50,” said Rosenberg.

So far in July, the dollar has gained 0.6%, after rising 2.8% in June.

U.S. dollar positioning among short-term investors in the week ended July 20 has flipped to net longs for the first time since March 2020.

Erik Nelson, macro strategist, at Wells Fargo Securities in New York, however, was not convinced the dollar could hold its gains in the coming weeks given the decline in U.S. yields.

“The dollar looks tired especially after the rally of the last few weeks,” he said. “It seems to be running out of steam both from a fundamental and technical perspective.”

Since the beginning of July, U.S. benchmark 10-year Treasury yields have lost 18 basis points, their largest monthly fall since March 2020. The dollar typically moves in tandem with U.S. yields.

Nelson also believes the Fed is going to be a laggard among central banks in normalizing monetary policy.

Investors’ next major focus is the Fed’s two-day policy meeting next week. Since the June 16 meeting, when Fed officials dropped a reference to the coronavirus as a weight on the economy, cases have risen.

Many economists still expect the meeting to advance discussions for a tapering of stimulus.

Against the safe-harbor yen, the dollar rose 0.3% to 110.54 yen.

Meanwhile, the euro was flat at $1.1775, showing little reaction to the purchasing manager surveys coming out of France, Germany and the euro zone as a whole.

Euro zone business activity expanded at its fastest monthly pace in over two decades in July as the loosening of more COVID-19 restrictions gave a boost to services, but fears of another wave of infections hit business confidence.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Ritvik Carvalho in London; Editing by Mark Potter, Nick Zieminski and Richard Chang)

 

USD/CAD Daily Forecast – Canadian Dollar Declines Against U.S. Dollar

U.S. Dollar Tries To Gain More Ground Against Canadian Dollar

USD/CAD is testing the resistance level at 1.2590 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index is currently trying to get above the 93 level. If the U.S. Dollar Index manages to settle above this level, it will move towards the resistance at 93.10 which will be bullish for USD/CAD.

Today, foreign exchange market traders had a chance to take a look at flash PMI reports from U.S. Manufacturing PMI increased from 62.1 in June to 63.1 in July compared to analyst consensus of 62.

Services PMI declined from 64.6 to 59.8 compared to analyst consensus of 64.8. It looks that workforce challenges and worries about the new wave of the virus have put pressure on sentiment in the services segment.

Meanwhile, Canada provided Retail Sales data for May. Retail Sales declined by 2.1% month-over-month in May compared to analyst consensus which called for a decline of 3%. On a year-over-year basis, Retail Sales increased by 24.6% as they were weak in May 2020.

Technical Analysis

usd cad july 23 2021

USD to CAD is currently trying to settle above the resistance at 1.2590. This resistance level has been tested during yesterday’s trading session and proved its strength.

In case USD to CAD manages to settle above the resistance at 1.2590, it will move towards the next resistance level at 1.2625. A successful test of this resistance level will push USD to CAD towards the next resistance at 1.2650. If USD to CAD gets above this level, it will head towards the resistance at 1.2685.

On the support side, USD to CAD needs to settle below 1.2560 to have a chance to develop downside momentum in the near term. The next support level for USD to CAD is located at 1.2540. If USD to CAD declines below this level, it will move towards the support level which is located at the 20 EMA at 1.2525.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: Loonie Falls for Second Straight Day on Subdued Oil Prices

The Canadian dollar slipped against its U.S. counterpart for the second straight day on Friday as the firm greenback and falling energy prices weighed on the commodity currency.

The dollar to loonie conversion today rose to 1.2607 against the U.S. currency, up from Thursday’s close of 1.2564. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened over 1.6% so far this month.

“The CAD has outperformed on the week and is the leading G10 currency by modest margin against the USD overall. That is largely a function of the CAD’s strong rebound from the five-month low it reached Monday, however. The USD remains generally overvalued against its major currency peers, our modeling work suggests, and USD/CAD’s overvaluation, which has been evident in our work for some time, remains intact,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“This suggests that the USD should edge back somewhat in the near-to-medium term to reconnect with what remains a clearly CAD-supportive backdrop.”

Canada is the world’s fourth-largest exporter of oil, edged lower after witnessing a volatile week. U.S. West Texas Intermediate (WTI) crude futures traded lower by 0.18 cents, or 0.25%, to $71.72 a barrel.

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.16% higher at 92.973 – not far from this year’s high of 93.437.

The world’s dominant reserve currency, the USD, is expected to rise further over the coming year, largely driven by the Fed’s expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to CAD pair higher.

“Attention turns to the July 28th FOMC meeting where we expect taper decisions to be discussed with a formal set of normalization plans released in the Minutes. Such a signal may lead to further moderate tactical gains in DXY to horizontal resistance at 92.85 and perhaps even to pivotal resistance at 93.44 before reversing as fundamentals remain USD negative,” noted analysts at Citibank.

“With the Fed still buying assets unabated, risk sentiment should remain relatively well supported, leading to relative resilience of risk/ high beta FX (Commodity Bloc, Asia EMFX – CNH, SGD and GBP) against low yielders (EUR, JPY, CHF). Overall, levels above 92.50 in DXY still look tough to sustain medium-term while the 90.5 – 91.0 area looks tough to break on the downside leading into the meeting.”

On the macro front, Canada’s June retail sales data dropped 2.1% in May, however, it was better than the expectations of a 3% decline.

A Busy Economic Calendar Puts the EUR, the Pound, the Loonie, and the Dollar in Focus

Earlier in the Day:

It was another particularly quiet start to the day on the economic calendar this morning. There were no major stats to provide the markets with direction in the early hours.

The Majors

At the time of writing, the Japanese Yen was down by 0.01% to ¥110.150 against the U.S Dollar, while the Aussie Dollar was up by 0.01% to $0.7380. The Kiwi Dollar was up by 0.06% to $0.69740.

The Day Ahead

For the EUR

It’s a busy day ahead on the economic data front. Prelim private sector PMIs for France, Germany, and the Eurozone will be in focus through the European session.

Expect plenty of EUR sensitivity to the numbers. We have seen some disappointing economic data of late. Weak numbers would further test support for the EUR.

At the time of writing, the EUR was up by 0.01% to $1.1772.

For the Pound

It’s a busy day ahead on the economic calendar. Prelim private sector PMIs for July and retail sales figures for June will be in focus.

Expect the UK’s retail sales and services PMI to be the key drivers. The markets will be looking to assess any damage from the upward trend in new COVID-19 cases.

At the time of writing, the Pound was flat at $1.3768.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. Prelim private sector PMIs for July will be in focus late in the day.

The services PMI will be the key driver.

On Thursday, the Dollar Spot Index rose by 0.07% to end the day at 92.822.

For the Loonie

It’s a relatively quiet day ahead on the economic calendar. Retail sales figures will provide the Loonie with direction late in the day.

At the time of writing, the Loonie was down by 0.01% to C$1.2564 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Price Prediction – The Exchange Rate Consolidates Following Wednesday’s Slide

The USD/CAD moved sideways as dollar strength eased as U.S. yields declined. The drop in yields came following a report from the Labor Department in the U.s. that showed that initial filings for unemployment insurance totaled 419,000 for the week ended July 17, above expectations. Existing Home Sales in the U.S. rose along with the median sales price which hit a record all-time high.

Technical Analysis

The USD/CAD moved sideways, consolidating the losses experienced on Wednesday. Support is seen near the 20-day moving average at 1.2481. Target resistance is seen near the July highs at 1.2807. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. The movement from overbought on the fast stochastic near 91, down to 74, reflects accelerating short-term negative momentum. Medium-term positive momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in positive territory with a declining trajectory which points to consolidation.

Existing Home Prices Rise

Existing home sales rose by 1.4% in June. This rise in the sale of existing homes snapped a 4-month consecutive decline in existing homes. The median price of an existing home sold in June hit an all-time high of $363,300. That was 23.4% higher than the price in June 2020. Sales of homes priced between $100,000 and $250,000 fell 16% annually. Sales of homes priced between $750,000 and $1 million jumped 119%.

USD/CAD Daily Forecast – U.S. Dollar Rebounds After Recent Pullback

Canadian Dollar Is Losing Ground Against U.S. Dollar

USD/CAD is currently trying to settle above the resistance at 1.2590 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to settle below the support at 92.80 but failed to develop sufficient downside momentum and moved back above 92.80. In case the U.S. Dollar Index manages to move above the 93 level, it will get to the test of the resistance at 93.10 which will be bullish for USD/CAD.

Today, U.S. reported that Initial Jobless Claims increased from 368,000 (revised from 360,000) to 419,000 compared to analyst consensus which expected that Initial Jobless Claims would decline to 350,000. Meanwhile, Continuing Jobless Claims decreased from 3.27 million (revised from 3.24 million) to 3.24 million compared to analyst estimate of 3.1 million.

Existing Home Sales report showed that Existing Home Sales grew by 1.4% month-over-month in June while analysts expected growth of 0.9%.

It should be noted that WTI oil continued to move higher which was bullish for commodity-related currencies, but this move did not provide enough support to Canadian dollar.

Technical Analysis

usd cad july 22 2021

USD to CAD managed to settle above 1.2560 and is trying to settle above the next resistance at 1.2590. In case this attempt is successful, it will move towards the next resistance level which is located at 1.2625. RSI has pulled back into the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

A move above the resistance at 1.2625 will open the way to the test of the resistance at 1.2650. In case USD to CAD gets above this level, it will head towards the next resistance at 1.2685.

On the support side, the nearest support level for USD to CAD is located at 1.2560. If USD to CAD declines below this level, it will head towards the support at 1.2540. A move below this level will open the way to the test of the support at the 20 EMA at 1.2520.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: Loonie Snaps Two-Day Gaining String on Dovish ECB

The Canadian dollar snapped two-day gains, depreciating against the U.S. dollar in early trade Thursday as the European Central Bank’s more dovish tone on its so-called forward guidance on interest rates helped boost the greenback.

The dollar to loonie conversion today rose to 1.2594 against the U.S. currency, up from Wednesday’s close of 1.2552. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened over 1.3% so far this month.

“While the CAD remains fundamentally undervalued, in our opinion, it is not clear at all that it can strengthen materially at this point. The good news is perhaps somewhat priced in and higher commodities and/or an even more hawkish BoC stance may be needed to persuade investors of the attractions that we continue to see in the CAD. Canada releases Housing Starts, International Securities Transactions and Wholesale Sales data this morning,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

Canada is the world’s fourth-largest exporter of oil, which extended gains on concerns of tighter supplies, providing support to the loonie. U.S. West Texas Intermediate (WTI) crude futures traded higher by 0.11 cents, or 0.17%, to $70.44 a barrel.

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.11% higher at 92.865 – not far from this year’s high of 93.437.

The U.S. dollar gained after the ECB said interest rates would stay at record low levels for a long period of time and warned that the new Delta variant of the coronavirus posed a threat to the eurozone growth.

The world’s dominant reserve currency, the USD, is expected to rise further over the coming year, largely driven by the Fed’s expectation of two rate hikes in 2023.

A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to CAD pair higher.

Huge Reversal on The USD Is Coming?

Major indices continue the V shaped reversal. It’s not the first time stock bulls do this, so I can’t even imagine anyone being surprised here.

When stocks are going up, gold is usually going down and that’s what we have now. Even a weaker USD isn’t helping.

Brent oil on the other hand is enjoying the weaker USD, and is pushing higher again.

The EURUSD is very close to creating a major buy signal. We have a false bearish breakout from the H&S pattern and wedge in place.

The USDCAD with a very nasty looking shooting star on the weekly chart. That can be a major sell signal.

The NZDUSD with a false bearish breakout of an important horizontal support. That can be bullish.

The GBPCHF with a false breakout again but this time, to the downside. The price is back above the major support, so the buy signal is almost ready.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and Dollar in Focus, with the ECB also in Action Today

Earlier in the Day:

It was a particularly quiet start to the day on the economic calendar this morning. There were no major stats to provide the markets with direction in the early hours.

The Majors

At the time of writing, the Japanese Yen was up by 0.15% to ¥110.120 against the U.S Dollar, with the Aussie Dollar down by 0.12% to $0.7350. The Kiwi Dollar was down by 0.19% to $0.69570.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic data front. Eurozone business and consumer confidence figures will be in focus.

Though material numbers, we don’t expect the numbers to have a lasting impact on the EUR, however.

The ECB monetary policy decision and the all-important press conference will be the key drivers.

With the ECB expected to stand pat on policy, the ECB press conference will be the market’s main area of focus.

Commentary on inflation, the economic outlook, and asset purchases will be key.

At the time of writing, the EUR was up by 0.03% to $1.1798.

For the Pound

It’s another quiet day ahead on the economic calendar. CBI industrial trend orders will be in focus later in the day. With little else for the markets to consider, expect some Pound sensitivity to the numbers.

Ultimately, however, market sentiment towards the economic outlook amidst the latest spike in COVID-19 cases will remain the key driver near-term.

At the time of writing, the Pound was down by 0.04% to $1.3708.

Across the Pond

It’s a busier day ahead on the economic calendar. Jobless claims figures for the week ending 16th July will be in focus later today.

Expect a jump in claims to weigh heavily in market risk sentiment. The markets will be looking for a drop down towards sub-300k levels…

At the time of writing, the Dollar Spot Index was up by 0.08% to 92.829.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no major stats due out to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.17% to C$1.2577 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Exchange Rate Prediction – The Dollar Eases as Safe-haven Flows Ebb

The USD/CAD gave back all of its weekly gains and is now lower for the week. The dollar was broadly down against most major currencies. U.S. yields were mixed, with the 10-year yield rising and the two-year stable. The economic highlight of the week for Canada is the May retail sales report on Friday. The U.S. 20-year treasury auction was weaker than expected as yields needed to back up by 2-basis points just minutes before the auction to accommodate the lack of buying interest. The backup in yields seemed to weigh on the greenback, leading to a softer USD/CAD.

Technical analysis

The USD/CAD gave back some of the gains it experienced this week following Monday 1.2% gain.  The currency pair sliced through resistance which is now support near the April highs at 1.2658. Target resistance is seen near the February highs at 1.2864. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. The movement from overbought on the fast stochastic near 91, down to 74, reflects accelerating short-term negative momentum. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to a higher exchange rate.

The Canadian Economy Could Accelerate

The opening of the Canadian economy has been slower than expected, according to Finance Minister Freeland. The lack of demand has come from the most recent lockdowns and the lack of vaccination. The vaccination stream will likely pick up as shots make their way to Canada. The upshot is that the government seems willing to continue to support revenue programs to businesses and households well beyond the dates initially agreed upon in September.

USD/CAD Daily Forecast – Canadian Dollar Rallies As WTI Oil Returns To The $70 Level

U.S. Dollar Is Under Strong Pressure Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2560 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index declined below the 93 level and is trying to settle below the support at 92.80. In case this attempt is successful, the U.S. Dollar Index will move towards the support at 92.40 which will be bearish for USD/CAD.

Today, foreign exchange market traders focused on the developments in commodity markets. WTI oil managed to gain strong upside momentum and returned to the $70 level which provided significant support to commodity-related currencies including Canadian dollar.

Meanwhile, the yield of 10-year Treasuries has moved from 1.20% to 1.29% as bond traders sold U.S. government bonds. This move indicates that demand for safe-haven assets is decreasing, which is bearish for the American currency that has recently enjoyed strong support due to fears about the spread of the Delta variant of coronavirus.

Technical Analysis

usd cad july 21 2021

USD to CAD gained strong downside momentum and is trying to settle below the support at 1.2560. RSI is in the moderate territory, and there is enough room to gain additional downside momentum in case the right catalysts emerge.

In case USD to CAD manages to settle below the support at 1.2560, it will move towards the next support level at 1.2540. A successful test of this level will push USD to CAD towards the next support at 1.2520. The 20 EMA is in the nearby so USD to CAD may get strong support near this level. If USD to CAD declines below the support at 1.2520, it will head towards the support level at 1.2500.

On the upside, the nearest resistance level for USD to CAD is located at 1.2590. A successful test of this level will open the way to the test of the resistance at 1.2625. In case USD to CAD gets above 1.2625, it will head towards the next resistance at 1.2650.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: Loonie Gains in Early Trade on Rising Oil Prices

The Canadian dollar strengthened against the U.S. dollar in early trade Wednesday as stocks edged higher and oil prices recovered.

The dollar to loonie conversion today fell to 1.2625 against the U.S. currency, down from Tuesday’s close of 1.2677. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened over 2% so far this month.

Canada is the world’s fourth-largest exporter of oil, which rose over 2% as risk appetite improved, providing support to the loonie. U.S. West Texas Intermediate (WTI) crude futures rose by 1.96 cents, or 2.96%, to $69.19 a barrel.

USD/CAD remains technically strong. Gains have extended further over the past week—to the point that we can no longer really consider this USD rise as corrective. Increasingly, the technical odds are tilting towards the idea that the early June low at 1.2007 was the low for the move down from 1.47. Short-term dynamics are USD-bullish; gains through the past couple of sessions are consolidating in a bull wedge/flag pattern, with renewed, short-term gains likely on a break above 1.2780,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“Short, medium and long run DMI oscillators are bullishly aligned for the USD, limiting downside risks (we spot short-term support at 1.2715/35 now) and supporting the outlook for ongoing gains. Key USD support is 1.2625/50 (a small gap on the chart may have to be filled here at some point). Recall that the 1.2635 point represented the 23.6% Fibonacci resistance of the 1.47/1.20 move down. We look for the USD to progress towards the 1.30 area (1.3024 being the 38.2% Fib point) in the next 1-3 months.”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.10% higher at 93.067 – not far from this year’s high of 93.437.

“BoC tapers the pace of its QE purchases to C$2bn/week as widely expected, in a policy decision that is largely neutral, if not slightly dovish with emphasis on a full recovery that is still a ways off. Policy guidance is little changed, with the output gap still estimated to close in H2 2022. Our base case is for another tapering in Oct, with net-zero purchases by year-end and BoC to commence rate hikes in 2022,” noted analysts at Citibank.

USD/CAD ends the week at 1.2615, reflecting USD strength and some disappointment from a fairly neutral BoC statement last week given the already-built rate expectations on the high side for 2022. However, both fundamentals and technicals continue to support the “buy CAD on dips” sentiment not only vs USD but also against low yielders (EUR, JPY and CHF).”

The world’s dominant reserve currency, the USD, is expected to rise further over the coming year, largely driven by the Fed’s expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to CAD pair higher.

A Quiet Economic Calendar Leaves Growth Concerns and the Dollar in Focus

Earlier in the Day:

It was a busy start to the day on the economic calendar this morning. The Japanese Yen and the Aussie Dollar were in action in the early hours.

For the Japanese Yen

Trade data was in focus this morning and drew plenty of interest ahead of the start of the Olympic Games.

According to figures released by the  Ministry of Finance, Japan’s trade balance rose from a ¥189.4bn deficit to a ¥383.2bn surplus. Economists had forecast a surplus of ¥400bn.

  • Exports were up 48.6% year-on-year in June, down marginally from a 49.6% rise in May.
    • To the U.S, exports surged by 85.5%, with exports to Western Europe up 50.0%.
    • Exports to China increased by 27.7% year-on-year.
  • Imports increased by 32.7% in June, year-on-year. In May, imports had been up by 27.9%.

In response to the numbers, the Japanese Yen moved from ¥109.920 to ¥109.896 against the Dollar. At the time of writing, the Japanese Yen was down by 0.04% to ¥109.890 against the U.S Dollar.

For the Aussie Dollar

All-important retail sales figures were also in focus this morning.

In June, retail sales fell by 1.8%, month-on-month, according to prelim figures. In May, retail sales had risen by 0.4%.

According to the ABS,

  • Food retailing (+1.5%) was the only industry to see a rise in June.
  • By state, Victoria (-3.5%) and New South Wales (-2.0%) led the decline, with both states imposing stay-at-home orders for part of the month.

The Aussie Dollar moved from $0.73296 to $0.73220 upon release of the numbers. At the time of writing, the Aussie Dollar was down by 0.15% to $0.7319.

Elsewhere

At the time of writing, the Kiwi Dollar was flat at $0.69180.

The Day Ahead

For the EUR

It’s another quiet day ahead on the economic data front. There are no major stats to provide the EUR with direction.

The lack of stats will leave industrial production figures from Italy and COVID-19 news in focus.

At the time of writing, the EUR was down by 0.05% to $1.1775.

For the Pound

It’s another particularly quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will continue to leave COVID-19 in focus. While the government has removed restrictions, a further spike in new cases could further derail market optimism near-term.

At the time of writing, the Pound was down by 0.04% to $1.3622.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no major stats to provide the Greenback with direction in what has been a quiet start to the week.

The lack of stats will leave market risk sentiment as the key driver near-term.

At the time of writing, the Dollar Spot Index was up by 0.03% to 92.999.

For the Loonie

It’s also quiet day ahead on the economic calendar, with economic data limited to housing sector numbers.

We don’t expect the numbers to influence, however, leaving crude oil inventories and market risk sentiment as key drivers.

At the time of writing, the Loonie was down by 0.08% to C$1.2692 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

 

USD/CAD Exchange Rate Prediction – The Loonie Gains a Foothold Despite Overall Greenback Strength

The USD/CAD gave back some of Monday’s gains following a trend line breakout on Monday. The dollar was broadly higher against most major currencies but failed to continue to gain traction versus the Loonie. U.S. yields were mixed with the 10-year yield rising after falling sharply on Monday. The economic highlight of the week for Canada is the May retail sales report on Friday. In the U.S. better than expected Housing Starts lifted the long end of the interest rate curve.

Technical analysis

The USD/CAD gave back some of the gains it experienced this week following Monday 1.2% gain.  The currency pair sliced through resistance which is now support near the April highs at 1.2658. Target resistance is seen near the February highs at 1.2864. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. The movement from overbought on the fast stochastic near 91, down to 74, reflects accelerating short-term negative momentum. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to a higher exchange rate.

Yields Bounce On Strong Housing Data

U.S. long-term treasury yields bounced on Tuesday after tumbling on Monday due to safe-haven flows. Robust U.S. Housing Starts and Building Permits helped buoy U.S. Yields. According to the Commerce Department, Housing starts rose 6.3% in June. Building permits fell 5.1% in June.

USD/CAD Daily Forecast – Test Of Support At 1.2740

Canadian Dollar Rebounds After Yesterday’s Sell-Off

USD/CAD is currently trying to settle below the support at 1.2740 while the U.S. dollar continues to gain ground against a broad basket of currencies.

The U.S. Dollar Index is trying to get above the resistance at 93.10. In case this attempt is successful, the U.S. Dollar Index will move towards the next resistance at 93.30 which will be bullish for USD/CAD.

Today, foreign exchange market traders had a chance to take a look at housing market data from U.S. Building Permits declined by 5.1% month-over-month in June while Housing Starts grew by 6.3%.

Tomorrow, traders will focus on Canada’s New Housing Price Index for June which is projected to grow by 11.3% on year-over-year basis.

Traders will also keep an eye on the developments in commodity markets as the recent sell-off in commodities put significant pressure on commodity-related currencies, including Canadian dollar. Today, commodity markets are moving higher despite fears about a new wave of coronavirus caused by the more infectious Delta variant, which is bullish for the Canadian dollar.

Technical Analysis

usd cad july 20 2021

USD to CAD managed to settle below the support at 1.2765 and is trying to settle below the next support level which is located at 1.2740. If this attempt is successful, USD to CAD will move towards the next support at 1.2710.

A move below the support at 1.2710 will open the way to the test of the support at 1.2685. In case USD to CAD declines below the support at 1.2685, it will move towards the next support level at 1.2650.

On the upside, the previous support level at 1.2765 will serve as the first resistance level for USD to CAD. In case USD to CAD manages to settle above this level, it will head towards the next resistance which is located at the recent highs near 1.2800. A successful test of this level will push USD to CAD towards the next resistance level at 1.2835.

For a look at all of today’s economic events, check out our economic calendar.

RBA Minutes Put the Aussie Dollar in Focus ahead of German Wholesale Inflation Numbers

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Japanese Yen was in action in the early hours. On the monetary policy front, the RBA meeting minutes and the PBoC loan prime rates decision will also be in focus later this morning.

For the Japanese Yen

Inflation drew interest in the early hours of this morning.

According to the Ministry of Internal Affairs and Communication, inflationary pressures returned in June. Consumer prices rose by 0.2% year-on-year, reversing a 0.1% decline from May. Economists had forecast for consumer prices to hold steady.

The core annual rate of inflation ticked up from 0.1% to 0.2%, which came in ahead of a forecasted 0.1%.

In response to the numbers, the Japanese Yen moved from ¥109.507 to ¥109.539 against the Greenback. At the time of writing, the Japanese Yen was down by 0.11% to ¥109.552 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.04% to $0.7341, with the Kiwi Dollar down by 0.13% to $0.6935.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. German wholesale inflation figures will be in focus, with little else for the markets to consider.

As the markets continue to monitor inflationary pressures, a further pickup in wholesale inflationary pressures would drive EUR support.

While the FED has talked of a willingness to allow inflation to go hotter for longer, the ECB has simply lifted its inflation target to 2%. Ahead of Thursday’s press conference, we can therefore expect EUR sensitivity to the numbers.

Away from the economic calendar, however, the continued global rise in new COVID-19 cases remains a negative.

At the time of writing, the EUR was down by 0.07% to $1.1792.

For the Pound

It’s another quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will continue to leave COVID-19 in focus, which has become a major area of interest for the markets.

At the time of writing, the Pound was down by 0.03% to $1.3671.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Housing sector data for June will be out later in the day.

We don’t expect the numbers to influence the Dollar or the broader market, however.

On Monday, the Dollar Spot Index rose by 0.22% to sensitivity 92.891.

For the Loonie

It’s also quiet day ahead on the economic calendar, with no material stats to provide the Loonie with direction.

A lack of stats will continue to leave market risk sentiment as the key driver on the day.

At the time of writing, the Loonie was up by 0.02% to C$1.2748 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.