2020-07-15 • Updated
USD/CAD keeps bringing joy to range-bound traders while consolidating between the support at 1.35 and the resistance at 1.3630. What may put an end to this peaceful calmness? In fact, there are several main triggers. One of the most obvious is, of course, the rate statement by the Bank of Canada on July 15, at 17:00 MT time. Does it really have anything to offer to the CAD traders, though? Time to find out.
Analysts expect no changes from the Bank of Canada unless its new Governor Tiff Macklem surprises the markets. Despite improved economic conditions in June with better employment change (952.9K in June) and signs of slow recovery after significant stimulus measures, the risks still remain around the corner. Back in June, Mr. Macklem already highlighted his expectations of inflation pressure. So, it is unlikely for him to show optimism this time. Experts suggest that the regulator may keep its interest rate unchanged at 0.25% for about 2 years and buy more bonds to its balance sheet if needed. At the same time, they see no need for urgent actions during this meeting.
Besides the Bank of Canada, the loonie has more things to worry about. One of them is a non-stop surge of Covid-19 cases in the United States. This risk is worrying for the CAD due to close ties between the two countries and threats of a new prolonged lockdown in the country of maple trees.
Other macro risks are related to China. Of course, one of them is related to the Hong Kong situation, as the United States can, in fact, impose sanctions on China after the new security bill. Secondly, there is still a lot of uncertainties around the next steps of the US-China trade deal. When will they be fulfilled and how? That’s mostly a rhetorical question for now. One thing that we know for sure is that’s a very big issue driving the risk sentiment across the markets right now and the Canadian dollar as well.
Finally, let’s not forget that the CAD is a commodity currency, heavily dependent on the oil prices. While OPEC+ is considering whether or not to keep the output cuts at the same level, the oil prices remain under pressure. That is, if the alliance agrees to increase the production levels, the oil prices will fall dragging the Canadian dollar down as well.
On the daily chart of USD/CAD, we can clearly see the 200-day SMA acting as a support at 1.35. On the upside, the range is limited by 1.3630 (23.6 Fibo level). The BOC needs to express an utterly optimistic or pessimistic tone to break the current range. If the bank is positive, after the breakout of 1.35 we will probably see the retest of June’s low at 1.3355. And if the bank sticks to its cautious stance, the pair will likely continue trading within the range.
This pair is trading sideways, too. The first resistance is placed at 79.5. It’s unlikely for bulls to break this level after the BOC meeting. The risk-off mood may pull the pair below 78.3 and the crossover of 100- and 50- day SMA. The next support will be placed at 77.6.
This pair is an interesting choice. After breaking a range above the long-term resistance at 1.5440, the pair surged towards the next crucial level at 1.5530. The breakout of it will push the pair towards March’s highs at 1.5640. Keep in mind, that the euro is stronger than the Canadian dollar right now. For bears, the correction below 1.5440 to the support at 1.4310 is in focus.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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