The Canadian dollar found a floor yesterday, and traded with a bullish bias overnight. The rally occurred in tandem with rising U.S. Treasury yields, rebounding oil prices, and higher stock markets.
West Texas Intermediate (WTI) oil found a floor at $65.00/barrel yesterday, and managed to grind out gains, reaching $68.18/b overnight.
The WTI retreat from last Wednesday’s peak of $75.37 followed news that the Organization of the Petroleum Exporting Countries agreed to raise production by 400,000 barrels per day August 1, and that OPEC agreed to a higher base production quota for the UAE. In addition, the spreading coronavirus delta variant outbreaks raised concerns that global growth would slow and so would crude demand. WTI prices slid and the break below $70.00/b triggered stop loss selling. The Canadian dollar dropped with crude prices.
Wall Street rallied on Tuesday and recovered all Monday’s losses, which set the risk tone overnight. Asia and European equity indexes are sharply higher. Wall Street is poised to open with gains.
EUR/USD is hovering around the $1.1770 support area Traders are awaiting Thursday’s pivotal European Central Bank meeting. The central bank will announce the outcome of their policy review with expectations that they will reinforce their dovish outlook, stressing the need for ongoing accommodative monetary policy. EUR/USD is also under pressure from recent flooding, and delta variant COVID-19 outbreaks.
EUR/USD technicals are bearish below $1.1850 looking for a test of $1.1700.
GBP/USD traded in a $1.3593-$1.3641 range, with a negative bias following the move below support at $1.3740. Renewed coronavirus restriction fears due to rising delta variant cases have undermined GBP/USD. Traders are also concerned about increased tensions between the U.K. and European Union over the Northern Ireland border. The technical picture is bearish with a move below $1.3560 targeting $1.3500.
USD/JPY is near the top of its 109.81-110.17 range. The gains are supported by the rebound in U.S. 10-year Treasury yields from a low of 1.14% to 1.247% in New York, while lingering safe-haven demand flows, and bearish technicals limit the topside.
AUD/USD dropped from $0.7339 to $0.7291 after June Retail Sales were worse than expected, falling 1.8% m/m (consensus forecast 0.5% decline). The news was quickly forgotten as global equities rallied and risk sentiment improved.
There are no economic reports today, suggesting Wall Street will drive FX direction.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
