USD/CAD - Canadian Dollar Suffering from Oil Price Blues - InvestingChannel

USD/CAD – Canadian Dollar Suffering from Oil Price Blues

The Canadian dollar resumed its post-Bank of Canada meeting downtrend overnight. The domestic currency sank under a wave of selling pressures in Asia fueled by the widening coronavirus outbreak and worries that actions to contain the spread of the virus are not working.

China said there were confirmed 2,744 confirmed infections and that 81 people have died. “Experts” are warning that the virus could affect 100,000 worldwide.

Gold prices jumped at the Asia open, rising from Friday’s closing level of $1,571.50/ounce to $1,588.30 before easing down to $1,581.50 in Toronto. Oil prices went the other way. They gapped lower, dropping from $54.21 U.S./barrel on Friday to $52.20 today. Oil traders are selling due to fears that the coronavirus will be very harmful to China’s economy and stifle demand for crude. The sentiment is also bearish due to forecasts that global oil supplies will exceed global demand in 2020.

The plunge in West Texas Oil prices sparked Canadian dollar selling, which was exacerbated by broad U.S. dollar demand against the G-10 majors. AUD/USD suffered additional pain as iron-ore prices declined due to China economic growth concerns.

Global equity indices are deep in the rate and U.S. futures are pointing to a negative open on Wall Street.

However, a few words of caution. This weekend marked the onset of Chinese New Year’s holidays. Many Asia markets were closed, including China, Hong Kong, Taiwan, Vietnam, South Korea, Singapore, and Malaysia. Australia was closed for its Australia Day holiday. Price action may be exaggerated as market closures suck out a lot of liquidity from markets.

EUR/USD ignored most of the noise in Asia but perked up in Europe. EUR/USD opened at its Asia peak of $1.1036, but prices dropped quickly after German economic data was released. The January IFO Survey reported lower than expected results for Business Climate, Current Assessment, and Expectation surveys and EUR/USD fell to $1.1020.

Traders are cautious ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting. Analysts do not expect any changes from the FOMC. Fed Chair Jerome Powell is expected to re-affirm that the Fed is on hold for the foreseeable future.

GBP/USD traded sideways in Asia, and then rallied at the European open, climbing from an Asia low $1.3050 to $1.3103, before plunging to 1.3050 in early Toronto trading. The intraday GBP/USD technicals are bearish, and sentiment is negative ahead of Thursday’s Bank of England policy meeting.

BoE Governor Mark Carney and a couple of his colleagues delivered dovish speeches earlier in the month, setting the stage for a rate cut. However, recent economic reports reduced suggest that the BoE could be patient, which offset rate cut fears.

There are not any top-tier U.S. or Canadian economic reports available today. FX traders will take direction from equity market prices and coronavirus updates.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians

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