Daily Currency Update

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The Greenback seems to be capitulating after many days of weakness. It seems to be within attractive levels as we await the ECB announcement tomorrow.

USD - United States Dollar

The U.S. dollar falls versus all G10 currencies, except versus the Japanese Yen. The U.S. dollar index has fallen 0.42 percent, and the Euro has increased 0.61 percent versus the U.S. dollar in a move that seems to be more of a capitulation and shows oversold levels for the U.S. dollar in the short-term. This morning, jobless claims continued their downtrend, a mildly encouraging signal. Continuing claims, a measure of ongoing unemployment reported with a one-week lag, dropped to 21.1 million from 24.9 million the prior week. The ADP research institute said the U.S. lost 2.76 million jobs in May.

Despite protests in the U.S., equity markets continue to rally, which has put pressure on the Greenback. The appetite for risk is shown in the FX markets through the fall of the US dollar. Emerging market currencies have benefited the most, especially the Indonesian Rupiah and Mexican Peso.

Key Movers

The Loonie has kept its gains versus the US dollar after the BoC kept its rate at 0.25 percent. The BoC said that market conditions have improved, and the economy appears to be avoiding worst-case scenarios. However, the BoC’s expectation of a “protracted and uneven” recovery and “heavily clouded” outlook means asset purchases, market support, and cooperation with fiscal authorities will continue well into 2021, at a minimum. From an economic standpoint, the BoC statement projects a 10-20 percent drop in the economy for the second quarter. Some key technical levels in the USD/CAD pair are 1.3855, 1.3733, and 1.3609 as resistance levels and 1.3481, 1.3462, and 1.3439 as support levels.

Surveys show economic improvement in May in China and Europe. Economic data from the developed world still looks grim, but hopes that the global economy has bottomed is pushing risky currencies higher. European purchasing manager indices released earlier confirmed a bounce from April’s lows and China’s Caixin services PMI signaled growth.

Australia’s economy confirmed it had fallen into recession for the first time in 30 years with a second straight contraction in the first quarter.

Crude oil hit its highest price in three months as speculation strengthened that OPEC and other major exporters will extend their current deal on output cuts for another three months. However, the rally stopped this morning and crude oil is trading flat as there was doubt at the OPEC about cheating by some nations on their output cuts deal.

Expected Ranges

USD/CAD: 1.3464 - 1.3600 ▲

EUR/USD: 1.1161 - 1.1250 ▼

GBP/USD: 1.2580 - 1.2600 ▼

AUD/USD: 0.6871 - 0.6940 ▼

NZD/USD: 0.6375 - 0.6435 ▼