The Canadian dollar sank, then rallied overnight, as traders searched for direction, and opened in New York nearly unchanged. The currency continues to be torn between U.S.-dollar demand due to the upbeat outlook for the American economy compared to Europe and Canadian economic fundamentals that support the Canadian dollar.
The Canadian dollar is tracking EUR/USD moves but supported by improving domestic fundamentals. The intraday USD/CAD technicals are bearish below the $1.2630-50 area, looking for a break below $1.2550 to extend losses to $1.2450.
The minutes from the March 17 Federal Open Market Committee meeting confirmed what Fed Chair Jerome Powell has been saying which is a rate hike is in “no time soon.” The minutes showed that Powell’s view was shared by the entire Committee. “All members agreed to maintain the target range for the federal funds rate at 0 to 0.25% and they expected that it would be appropriate to maintain this target range until labor market conditions had reached levels consistent with the Committee’s assessments of maximum employment and inflation had risen to 2 percent and was on track to moderately exceed 2 percent for some time.”
EUR/USD bounced around in a $1.1862-$1.1892 range. The topside was capped because the FOMC minutes did not give any reasons to incite a global “risk-on rally. Eurozone and German data were not impressive. EUR/USD gains are capped by interest rate differentials between the U.S. and European Union, which favour the greenback. The EUR/USD intraday technicals are bearish below $1.1910.
GBPUSD is recovering after touching $1.3720 overnight. News that the U.K. may achieve coronavirus “herd immunity” by Monday supported gains as did the better than expected U.K. Construction Purchasing Managers Index data, which was 61.7 compared to 54.6.
USD/JPY dropped from 109.89 to 109.22 in early New York trading. The dovish FOMC minutes and the drop in 10-year U.S. Treasury yields below 1.65% are weighing on prices.
AUD/USD and NZD/USD traded quietly in tight bands with prices tracking broad U.S. dollar sentiment. Weaker than expected New Zealand Business confidence data was ignored.
Powell is speaking (virtually) at an International Monetary Fund function today. He is not expected to deviate from his U.S. economic outlook. Weekly jobless claims data is also due.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians