The Canadian dollar was a bit bouncy overnight. USD/CAD dipped to $1.2271, bounced to $1.2317 as New York traders turned on their screens, then retreated to $1.2292. The price action is just “noise” as FX volumes were lighter than usual due to a U.K. Bank holiday.
The week started very quietly in Asia. Chinese and Japanese markets are closed until Thursday. China is enjoying a Labour Day break while Japan has Golden Week holidays. European equity indexes have eked out gains this morning, and US futures are pointing to a positive open on Wall Street.
Today’s U.S. data includes Personal Consumption Expenditures (PCE), Chicago Purchasing Managers Index, and Michigan Consumer Sentiment. Gold and crude prices are a tad higher from where they closed Friday.
The Canadian dollar remains buoyant, thanks to the Bank of Canada’s hawkish bias, firm oil prices, and robust economic growth expectations. Traders are looking past the slow rollout of vaccines as few people under 50 have received even one shot. Meanwhile, 40% of Americans have received at least one shot.
West Texas Intermediate (WTI) oil prices are providing another layer of support for the Canadian dollar. The 2021 WTI uptrend is intact while prices are above $61.80/barrel, looking for a test of resistance in the $67.00/b area. Traders expected a surge in global demand as the major global economies recover from the pandemic.
EUR/USD in narrowly in Asia then popped from $1.2014 to $1.2055 in Europe due to strong economic data. German March Retail Sales surged 7.7% m/m, compared to 2.7% m/m in February. The final reading of Eurozone April Manufacturing PMI was 62.9, a tad slower than expected but still better than the March reading of 62.5. The short term EURUSD outlook is bearish while prices are below $1.2080, with a move below $1.1980 targeting $1.1940.
GBP/USD has a negative outlook following the break of the April uptrend line at $1.3890, with a move below $1.3870 extending losses to 1.3840. UK markets were closed for the Early May Bank Holiday.
AUD/USD rose from $0.7708 to $0.7732, supported by a modestly soft U.S. dollar vs the majors, and by better than expected AIG Manufacturing PMI, which was 61.7 from 59.9 in March. Traders are looking ahead to the Reserve Bank of Australia monetary policy meeting tomorrow and quarterly economic forecasts on Friday.
U.S. Institute for Supply Management Manufacturing is expected at 57.1 compared to 59.6 in March.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians