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The Loonie outperforms the Greenback due to the “risk-on” environment

Friday 12 July, 2019

Daily Currency Update

CAD - Canadian DollarWith the lack of critical local economic releases, the "risk-on" environment and crude oil price action seem to be the only positive catalysts for the Loonie. Crude oil has been trading strongly during the week, and in spite of that, it has not had much direction within the last few hours. The market sentiment towards the "black gold" is positive, just as it is for the Loonie. The OPEC and its allies agreed to extend production cuts into 2020 earlier this month, and the IEA is saying that they may need to reduce production even more as the market has returned to surplus. A barrel of West Texas Intermediate is trading firmly around $60 as market participants are more concerned about the immediate threat of a Tropical Storm Barry-induced production shutdown and tensions in the Middle East. However, the decrease in crude oil demand globally is adding to the risks of another glut in the short-term.Technically speaking, the USD/CAD pair has space to fall to the mid 1.29s and hold a long-term uptrend that comes from September 2017. However, this morning, it has failed to break to the downside, trading at support and bouncing from 1.3040. If it holds above the support, it might test resistance levels: 1.3070, 1.3087, followed by 1.3097.

Key Movers

The Sterling is in a rally mode this morning despite Boris Johnson, the front-runner to become Prime Minister, frequently refusing to rule out suspending Parliament to advance through Brexit against its will. In China, exports growth slowed to 1.3 percent in June and imports fell more than expected as the trade war continues with the U.S. and a global slowdown damages trade. Imports fell by a wider than expected 7.3 percent. The USD/CNH pair is trading to the upside 0.12 percent, showing a weaker Chinese Yuan or 6.8842 Yuan per U.S. dollar. As expected, as soon as the news about negative-yielding European junk bonds made it to the front page, the "everything rally" came to an end. It will be interesting to see the impact of the bond market in the fx market and see where the Euro crosses are headed. For now, the EUR/USD pair is trading at 1.1245, showing no change since yesterday's close. However, gold is rising 0.27 percent, which provides a hint regarding U.S. dollar and Euro trading.

Expected Ranges

  • USD/CAD: 1.3020 - 1.3058 ▼
  • EUR/CAD: 1.4640 - 1.4700 ▼
  • GBP/CAD: 1.6328 - 1.6427 ▲
  • AUD/CAD: 0.9096 - 0.9141 ▲
  • NZD/CAD: 0.8690 - 0.8742 ▼