USD/CAD – Canadian Dollar Steady and Firm

The Canadian dollar is poised to finish the week with a slight gain compared to last Friday’s close. USD/CAD closed at $1.2614 on July 16, and it opened at $1.2567 today.

It was a wild and wacky week for USD/CAD. Prices soared to $1.2805 on Monday due to a wave of negative risk sentiment, which sent traders scrambling for safe-haven currencies. A lack of top-tier economic reports had traders looking elsewhere for direction. They found it in articles about rapidly spreading COVID-19 delta-variant cases, resulting in new lockdown measures and restrictions in many countries. Traders concluded that the global economic recovery would be derailed and sent oil prices sharply lower. Global equity indexes tumbled as did U.S. Treasury yields, and gold rallied.

It was a different story on Tuesday. Equity prices rebounded and recovered all of Monday’s losses in part because traders of reports that the delta-variant outbreak did not lead to high numbers of cases requiring hospitalization. Safe-haven trades were abandoned, the U.S. dollar retreated, and USD/CAD sank.

Traders hoping for clear cut direction from the European Central Bank policy meeting on Thursday were disappointed.

The meeting did not live up to its advanced billing. The new guidance that was hyped ahead of the meeting turned out to be the old guidance in a different package.

ECB interest rates are expected to be low for an extended time. The statement said, “In support of its symmetric two per cent inflation target and in line with its monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.”

EUR/USD briefly popped above $1.1800 during the ECB press conference, but is now probing critical support in the $1.1750 area, which if broken targets $1.1700 then $1.1640.

The Canadian dollar will ignore today’s Retail Sales data as the expected drop due to the coronavirus and is stale.

There are not any U,S, economic reports on tap today.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians