USD/CAD drops below 1.2900, sets new multi-year lows

USD/CAD has recently dropped below the 1.2900 level, setting fresh multi-year lows.
Driving the move has been USD weakness, with the loonie largely ignoring OPEC+ developments.

Joel Frank Independent Analyst

USD/CAD is suffering amid a broader tone of USD weakness that saw the Dollar Index (DXY) drop as low as the 90.50 level at worst levels. The pair dropped below the 1.2900 level without too much fuss and is currently trading just above lows of the day at 1.2866 around 1.2880. At present then, USD/CAD is trading with losses of around 40 pips or roughly 0.3%.

USD/CAD conforms to dollar dynamics as loonie ignores OPEC+ uncertainty

The loonie has largely traded as a function of US dollar dynamics on Thursday and ignored ongoing OPEC+ uncertainty and choppy crude oil market conditions. For reference, the cartel has reportedly agreed to a small output hike in January of 500K barrels per day. Crude oil markets appear happy with what they are seeing, with WTI up about half a percent on the day, not that CAD has paid too much attention to anything other than rampant USD weakness anyway.

Turning to the USD and reasons for Thursday’s weakness; no specific catalysts appeared directly responsible for USD’s early decline on the day, though a recent batch of strong US services PMI data for November appeared to only worsen things;

Markit released its final services PMI reading for November, which was revised higher to 58.4 from the preliminary estimate of 57.7, the highest reading in over five years. Shortly after, the Institute of Supply Management released their estimate of services PMI for November, which came in at a solid 55.9, only very marginally below expectations for 56.0. Importantly, the employment subindex remained above the 50 mark, implying that service sector employment was in expansion in the month just gone despite the worsening virus situation.

Going into the data, some had argued that strong numbers might be USD bullish as it might discourage the Fed from providing further accommodation at the FOMC meeting later this month. However, this appears not to have been the case. Instead, the data triggered a risk on reaction, with gains being seen in US equity markets (and the S&P 500 hit fresh all-time highs) and safe haven USD taking a knock hurting demand for safe-haven currencies like the USD.

USD/CAD downside builds since downside break of descending triangle

USD/CAD was testing the bottom of a medium-term descending triangle on Wednesday but appears to have decisively broken to the south of it now. To the upside, the 1.2900 level and the previous bottom of the old descending triangle just above it ought to offer strong resistance, while to the downside, there is now very little by way of support ahead of psychological 1.2800 level, with the October 2018 low coming in just below it at 1.2780.

USD/CAD two hour chart

Author

Joel Frank

Independent Analyst

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset

EUR/USD stays defensive below 1.1900 as USD recovers

EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.

GBP/USD holds above 1.3600 after UK data dump

\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.

Gold sticks to modest intraday losses as reduced March Fed rate cut bets underpin USD

Gold languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.

Cardano eyes short-term rebound as derivatives sentiment improves

Cardano (ADA) is trading at $0.257 at the time of writing on Thursday, after slipping more than 4% so far this week. Derivatives sentiment improves as ADA’s funding rates turn positive alongside rising long bets among traders.

The market trades the path not the past

The payroll number did not just beat. It reset the tone. 130,000 vs. 65,000 expected, with a 35,000 whisper. 79 of 80 economists leaning the wrong way. Unemployment and underemployment are edging lower. For all the statistical fog around birth-death adjustments and seasonal quirks, the core message was unmistakable. The labour market is not cracking.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.