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The Canadian dollar falls in overnight trading after profit taking

CAD - Canadian Dollar

The USD/CAD pair increases 0.18 percent this morning and it continues trading within a 1-month range between approximately 1.3380 and 1.3500. There are no major Canadian events today, but the big news will take place tomorrow when the BoC decides about its rate, and it will probably make the Loonie move to a different price level outside of the current range. The expectation is that the BoC will not move its key rate, but the big question now is whether the BoC will hint at the possibility of a future rate cut after becoming more dovish during the April rate decision. The rate has been stable at 1.75 percent since October.

Market participants are eager to find clues about future moves from the rate statement. The labour market created a record number of jobs in April, and consumer spending has been robust. However, at the same time, trade tensions between the US and China have become more complicated, which has hurt risk appetite towards currencies like the Loonie.

Crude oil prices are trading flat this morning after falling around 9 percent last week. Technically speaking, this morning, the Loonie is looking weak against major currencies such as the Greenback, Euro, Aussie and Kiwi dollar; however, the USD/CAD is touching a critical resistance on the upside (1.3480). Additionally, given the big event coming tomorrow, we should expect a trading range between 1.3430 and 1.3480 today.

Key Movers

President Trump was in Japan for the Memorial Day weekend where he attended several events with Prime Minister Shinzo Abe as the Asian nation continues to try to avoid becoming the next White House tariff target. Trump did mention that he is, “...not ready,” to make a deal and that tariffs could go up, “...very, very substantially, very easily,” against China. The USD/CNH pair is trading 0.24 percent higher this morning at 6.9235 (weaker Yuan). Another potential tariff target is the Eurozone, which has rejected a US suggestion for a quota to be placed on car exports to America. The EUR/USD pair trades flat at 1.1190 this morning.

In Asia, Alibaba Group is considering raising $20 billion via a second listing in Hong Kong. For Hong Kong, getting the listing seems reasonable, but there might be risks associated with such a large float, as some economists warn the demand for liquidity will soar local currency interest rates higher. The USD/HKD pair trades at 7.8483, which represents a fall of only 0.04 percent (slightly stronger Hong Kong dollar).

Expected Ranges

USD/CAD: 1.3430 - 1.3480 ▲

EUR/CAD: 1.5035 - 1.5091 ▲

GBP/CAD: 1.7018 - 1.7108 ▲

AUD/CAD: 0.9281 - 0.9350 ▲

NZD/CAD: 0.8771 - 0.8830 ▲