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With the lack of economic data releases, the Loonie follows the U.S - China trade wars

CAD - Canadian Dollar

The USD/CAD pair trades at 1.3230, representing a 0.21 percent increase (weaker Loonie) at the time of this writing, despite crude oil reversing its losses. However, the trade war continues to weaken demand for crude oil. The next essential data about the Canadian economy and the Loonie will be released this Wednesday when the Ivey purchasing managers index is released, followed by the new housing price index on Thursday and employment numbers on Friday.

The drivers for the Loonie have been external over the last two days. Equity markets melted down yesterday around the world and pulled the Loonie down due to its positive correlation. China impacted the market yesterday, Monday, after it responded to Trump's tariff threat by letting the Yuan weaken and stopping imports of American agricultural products. However, after that, the bounce in risky assets came back; China's Yuan stabilized following an official fixing, which was set stronger than expected. The PBOC set its Yuan daily reference rate at 6.9683 per dollar, stronger than the 6.9871 forecast from a Bloomberg survey of traders. Experts say that Chinese officials needed to avoid capital flight.

Technically speaking, the USD/CAD seems overbought following the recent "risk-off" environment, and it looks like it is forming a topping pattern in the short-term. Therefore some key resistance and support levels to watch are 1.3240 and 1.3195 respectively. Once those levels are broken by price action, the USD/CAD pair might show a more precise direction, likely driven by external factors.

Key Movers

In the U.K., Jeremy Corbyn warned he'd call a vote of no-confidence in the U.K. government when Parliament returns in September to prevent the new PM from taking Britain out of the EU without a deal. Johnson, meanwhile, said another election is the "last thing" he wants.

In Australia, the RBA left its cash rate at 1 percent, as expected, and said rates should stay low to reduce unemployment and make progress toward its inflation target. The RBA also introduced some official forward guidance that, "…an extended period of low-interest rates will be required. "

According to Bloomberg, “The race to the bottom for interest rates is on.” Markets are now pricing in more than 400 basis points of cuts from the Fed, ECB, BOJ and other global central banks.

Expected Ranges

USD/CAD: 1.3171 - 1.3231 ▲

EUR/CAD: 1.4756 - 1.4861 ▼

GBP/CAD: 1.6017 - 1.6147 ▲

AUD/CAD: 0.8906 - 0.8985 ▼

NZD/CAD: 0.8616 - 0.8692 ▲