– The Canadian dollar is sinking deeper overnight
– Futures on US stocks are rebounding from the night low quite cool
– The US dollar adds an increase compared to the open Monday
USDCAD snapshot: open 1.3003-07, overnight range 1.2985-1.3035, pre-closing 1.3014, WTI open $ 101.45, gold open $ 1.857.95
The Canadian dollar depreciated as investors demanded US dollars, continuing the trend from Monday.
The USDCAD rally on May 5 accelerated at a break above 1.2910 yesterday and continued unabated until it reached serious resistance at 1.3035 overnight. This resistance is a 38.2% Fibonacci retracement level across the pandemic range of 1.2020-1.4640. If the level contains a profit, a break below 1.2700 will shift the focus to 1.2450.
However, the direction of the Canadian dollar strongly correlates with the S&P 500. The Canadian dollar melts when the S&P 500 falls and the index is under water. Stock traders have finally realized that the era of ultralight money after the pandemic is over.
Inflation is rising in the US, Canada and other countries. Central bankers reacted slowly, insisting that the price increase was “transitional”, but as prices continued to rise, they were forced to admit their mistake. Their mistake means that interest rates will rise higher and faster than originally expected.
Bond traders reacted and increased the yield on the 10-year U.S. Treasury from 2.65% a month ago to 3.20% yesterday. Stock markets fell and the US dollar rose.
The Canadian dollar has also suffered, despite the fact that oil prices have peaked in 14 years. West Texas Intermediate reached a mark of 129.85 in March and has since consolidated in the $ 95.00- $ 111.00 range since April 18. At the moment, support for the Canadian dollar due to high oil prices is being eroded by widespread demand for “risk-averse” US dollars.
EURUSD overnight in the range of 1.0537-1.0585. EURUSD’s profit from forecasts of two ECB rate hikes by September is offset by recession risks due to the Russian invasion of Ukraine.
Bullish sentiment was also undermined after today’s German ZEW poll. It noted: “Expectations and assessments of the economic situation continue to point to the deterioration of the German economy over the next six months.”
Intraday EURUSD technical indicators are below 1.0590.
GBPUSD jumped in the range of 1.2306-1.2375. Traders run counter to expectations of higher rates in the UK and the risks of a recession.
USDJPY was on the defensive, falling from 130.58 to 129.80 due to falling 10-year U.S. Treasury bond yields from 3.08% to 3.0% overnight.
AUDUSD and NZDUSD have suffered from road demand for the US dollar and negative attitudes to risk.
No economic reports today.