Daily Currency Update

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The Loonie has a relief rally and awaits more direction from crude oil

CAD - Canadian Dollar

The USD/CAD pair falls around 0.15 percent (stronger Loonie) following a rebound in crude oil. Crude oil bounces around 1.7 percent as Saudis offered the comfort that OPEC will hold global oil markets balanced after worries over the US-China trade dispute triggered an abrupt slump in oil prices of around 16 percent in May. Saudi Energy Minister Khalid Al-Falih commented that crude oil weakness in May is "unwarranted" and reiterated his confidence that OPEC and its allies will take action to stabilize the market beyond June.

On the release side, Canada's manufacturing sector saw operating conditions worsen again in May. Production continued to contract amid the sharpest drop in new orders since December 2015. More positively, employment saw a fractional increase after a slight dip in April, while input price inflation eased to its slowest rate in over four years.

Technically speaking, the USD/CAD pair looks exhausted in the short-term to the upside. Additionally, during today's session, there is an important resistance around 1.3520, which was tested this morning. There is an important support to the downside around the levels trading at the time of this writing at 1.3490; however, 1.3465 seems to be a stronger level to be tested if today's positive momentum for the Loonie continues.

Key Movers

Global equity markets headed towards their worst month of the year in May, as a steady stream of negative headlines over the relationship between the US and its trade counter-parties sent investors out of stocks and piling into US Treasuries. The USD lost some ground on Friday mainly against the Japanese Yen, which rallied more than 1.2 in one day.

The RBA is expected to cut policy rates by 25 basis points to 1.25 percent. Market participants will focus on any forward guidance from RBA Governor Phillip Lowe's speech. If they are less dovish and signal a more optimistic outlook, this could suggest they are willing to wait for the impact of tax cuts and policy easing to appear in the data. If however, they are dovish, focusing on the deteriorating growth outlook and rising unemployment, that could signal the 2nd cut is imminent, and encourage the market to price in more than two cuts.

Regarding the Euro, this Thursday the ECB meeting should deliver details of TLTRO III and we could expect a dovish Draghi.

The Mexican Peso weakened this morning despite that Mexican President Andrés Manuel López Obrador said his foreign minister was en route to Washington to avoid confronting Donald Trump.

Expected Ranges

USD/CAD: 1.3464 - 1.3511 ▼

EUR/CAD: 1.5041 - 1.5120 ▼

GBP/CAD: 1.7018 - 1.7085 ▼

AUD/CAD: 0.9365 - 0.9391 ▼

NZD/CAD: 0.8837 - 0.8880 ▼