The Canadian dollar lost over 1.5% of its value against the U.S. dollar in overnight trading. A litany of woes transpired to pummel the currency, with plunging crude prices leading the way. A nearly 3% slide in West Texas Intermediate oil prices, combined with new COVID-19 delta variant cases in Europe and Australia, and heightened tensions between China and the U.S., triggered a stampede into safe-haven U.S. dollars.
The Organization of the Petroleum Exporting Countries and Russia reached an agreement with the United Arab Emirates. The UAE’s base production level was increased along with other cartel members, and production is being increased by 400,000 barrels per day, beginning in August and continuing until the end of 2022.
The drop in oil prices exacerbated negative Canadian dollar sentiment following last week’s more dovish than expected Bank of Canada policy meeting. Traders were unhappy with BoC downgrading 2021 economic growth to 6.0% from 6.5% in April, and took it out on the currency.
USD/CAD technicals are bullish while trading above $1.2405, supported by the break above the downtrend line from last November. The break above $1.2650 overnight sets the stage for a test of $1.3000.
Widespread safe-haven demand for U.S. dollars made the Canadian dollar the worst-performing currency compared to the U.S. dollar. The Australian and New Zealand dollars were not far behind, losing 1.0% and 0.77% respectively.
USD/JPY dropped from 110.09 to 109.62 due to U.S. 10-year Treasury yields falling to 1.248% from 1.30%, and safe-haven demand for yen.
EURUSD is trading at key support after dropping from 1.1813 to 1.1766 overnight. Risk-aversion pressures are exacerbated by new COVID-19 restrictions in France, and Germany, and due to economic growth concerns from flooding in many areas. Traders are also worried about the European Central Bank meeting on Thursday, especially when recent Consumer Price Index reports highlighted the divergent inflation rates between the U.S. and Eurozone.
GBPUSD fell to $1.3702 from $1.3773 as slowing U.K. growth fears exacerbated the risk-aversion fueled selloff. However, GBP/USD as strong support in the $1.36750 zone.
AUD/USD underperformed as delta-variant coronavirus outbreaks, soft commodity prices, and last week’s dovish Reserve Bank of Australia policy meeting weigh on prices. NZD/USD traded lower but outperformed AUD/USD.
There are no economic reports of note today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians