USD/CAD Open: 1.2666-70, Overnight Range: 1.2661-1.2707, Previous Close: 1.2687
WTI Oil is at $68.67 and gold is at $1,804.40. US markets are higher today.
For today, USD resistance is at 1.2745. Support is at 1.2607.
• Canadian dollar starts as worst performing G-10 major since Thursday’s NY open
• Kabul bombing leaves undercurrent of negative risk sentiment
• Fed chair Powell’s speech due at 10:00 am
The Canadian dollar took a pounding yesterday. FX liquidity is poor because it is the last weeks of summer, and traders were already jittery ahead of Fed chair Jerome Powell’s speech today at 10: 00 am ET. The news of a terrorist bombing at the Kabul Airport sparked a wave of risks- aversion US dollar demand.
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The Canadian dollar underperformed overnight. AUDUSD and NZDUSD recovered all of yesterday’s losses and opened unchanged, while the Canadian dollar is 0.51% lower.
There is a lot of speculation around Fed Chair Jerome Powell’s speech today, in part due to its title; “Macroeconomic Policy in an Uneven Economy.” Many analysts are anticipating hints, if not an announcement, that the Fed may begin tapering in September. Other analysts believe if tapering occurs, it won’t happen before November.
There are no shortages of Fed policymakers advocating for an early start to tapering.
Yesterday Dallas Fed President Robert Kaplan said that if he continues to see progress in the economy between now and the September meeting, “I’m going to be suggesting that we should move toward announcing a plan as early as our September meeting and beginning our tapering process in October.”
St Louis Fed President James Bullard agrees. “We probably don’t need the asset purchases at this point.”
Kansas City Fed President Ester George told Bloomberg that tapering should start this year, noting the Fed has reached its criteria of “substantial further progress.”
Those comments underpinned the US dollar against the G-10 majors and the Canadian dollar.
EURUSD consolidated yesterday’s losses in a 1.1743-1.1770 range and is trading with a mild bid. Part of the reason is that comments from ECB officials Luis de Guindos and ECB Chief Economist Philip Lane suggest the central bank may adopt a less dovish tone at their next meeting on September 9.
GBPUSD is recouping yesterday’s losses and rallied from 1.3681 to 1.3720 in NY. The currency remains under pressure following a string of weaker than expected economic reports, which reduced the risk of a near-term rise in interest rates.
USDJPY dropped yesterday due to safe-haven yen demand following the Afghanistan terror attack but as risk aversion faded, prices rallied, alongside steady to firm US 10-year Treasury yields which are at 1.348%
AUDUSD and NZDUSD tracked broad US dollar movement, with AUDUSD traders ignoring weaker than expected retail sales data.
Canada Industrial and Raw Materials Price index data is due but will be overshadowed by Jackson Hole.
Today’s Suggested Range USD/CAD: 1.2600 – 1.2700
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