Daily Currency Update

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The Loonie follows the U.S. dollar’s lead, increasing against G10 currencies.

CAD - Canadian Dollar

The Loonie rises against G10 currencies, except for the U.S. dollar. On the economic release side, Canada home prices in January are up 2.1 percent from a year ago, and they rose 0.1 percent month to month in January, according to the Canada Teranet House Index.

At the time of this writing, the Loonie rises 0.29, 0.48, 0.47, and 0.14 percent versus the Yen, Aussie, Kiwi, and Pound, respectively, in a bounce helped by the price of crude oil and indirectly by the rise of the U.S. dollar, which is one of the currencies most correlated with the Loonie mostly due to geography. It is essential to understand as well that the Loonie is one of the least volatile currencies within the G10, which makes the Loonie soar in this type of market environment (i.e. coronavirus).

In the U.S., yesterday, the Fed minutes indicated they could leave interest rates unchanged for many more months amid concerns about a persistent undershoot of their inflation goal, potential room to boost further employment, and risks coming from the coronavirus and trade. However, market participants keep expecting the that the Fed will lower interest rates at least once this year, pricing in about 40 basis points of easing by the end of December this year. The Greeenback continues rising and has ignored those expectations.

Key Movers

The U.S. dollar replaces the Japanese Yen as a safe haven, at least temporarily due to virus concerns. The Greenback is higher against their Group of 10 peers and emerging currencies after news that South Korea announced its first confirmed death resulting from the virus. In general, the U.S. dollar continues to outperform, as it is less weak compared with the rest of world’s economies, there are decent earnings numbers in the U.S., and there are ongoing worries over the threat of recessions in Japan and the Eurozone.

The Yen had the most significant fall versus the U.S. dollar in 6 months yesterday, with market participants unwinding their bets in favour of the Yen. The USD/JPY is in a rally mode, increasing 0.58 percent so far. Technically speaking, once the USD/JPY broke the 110.29 level to the upside, it has been unstoppable, showing a bullish formation for that pair (bearish for the Yen). The Yen is trading at 111.99 at the time of this writing. Even the CAD/JPY pair is in a rally mode, trading at 84.44 at the time of this writing and showing a 0.24 percent appreciation.

The Australian dollar got hammered to an 11-year low last night after a rise in the January unemployment rate.

The Pound versus the U.S dollar pair failed to breach day highs after better-than-expected U.K. retail-sales data. The Sterling fell after some sophisticated market participants stopped out long positions when they saw the Pound failing to make new highs despite the positive data. It is too early to say that recent developments will see a significant U-turn in Bank of England sentiment.

The EUR/USD pair is trading above a strong support around 1.0790 and a critical resistance level of 1.0816 at the time of this writing.

Expected Ranges

USD/CAD: 1.3225 - 1.3255 ▼

EUR/CAD: 1.4300 - 1.4347 ▲

GBP/CAD: 1.6920 - 1.7125 ▼

AUD/CAD: 0.8750 - 0.8800 ▼

NZD/CAD: 0.8350 - 0.8400 ▼