Worries about a potential economic slowdown in China, US/Turkey tensions rising even higher, commodities dropping, leaving U.S, stock markets having their worst day in two months yesterday. Today equity markets continue to fall, the unexpected surge in oil inventories caused oil to trade below $65 USD a barrel for WTI, plus commodities such copper have dropped 5% in the past week. This has left the USD stronger as a flight to quality gathers strength.
The Canadian dollar is weaker based on the above news, and will likely stay around these levels in the near term, once the sanctions against Iran are fully in place, oil prices theoretically should move higher and this should allow the Cad to get stronger, but that is still some time away.
USDCAD 1.3143, 1.3138, 1.3128 1.3165, 1.3172, 1.3188
USD-CAD found support at yesterday’s three-session low at 1.3050 amid a broad bid for U.S. Dollars. President Trump’s threatened tariffs on Canadian made cars, in a tweet late Friday as reported by the WSJ, if a deal is not struck with Canada on NAFTA. Any sure signs of progress on the NAFTA front would likely spark a rebound in the Canadian Dollar, as the uncertainty about the re-negotiation has seen a discount being build into the currency. USD-CAD has support at 1.3050 and resistance at 1.3108-10.a
EUR-USD has remained heavy after printing a 13-month low at 1.1316, which came amid a broad bid for Dollars, with the U.S. currency seen as a safe bet in prevailing uncertain times. We advise market participants to remain at their weather stations: Aside from Turkey’s plight, and the flash of contagion across the globe this week, there are concerns about an escalating trade war involving the U.S., China, Japan and the EU — economies that form the major chunk of world GDP. We remain bearish of EUR-USD. The relative strength of the U.S. economy should be showcased by incoming data, which in turn should girder the Fed’s course to further tightening (despite the recent turmoil in global markets we still expect two more 25 bp hikes in the Fed funds rate this year, one in September and another in December). EUR-USD has resistance at 1.1425.