Pound loses ground to resurgent US dollar
"No-one is really sure what the trigger for the USD rally was but regardless, the USD made some sharp advances Thursday and the move continues today. USD/CAD was pulled along for the ride although the CAD has steadied through the overnight session and picked up a little ground on the crosses," says Shaun Osborne at TD Securities.
The markets are shunning safe-havens as well as commodity currencies (AUD/CAD testing 1.01). Commodity prices are a little sluggish this morning in response to the stronger USD.
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With Canadian employment out later today, the CAD is likely to remain choppy. We are erring on the side of the April jobs numbers disappointing—no big rebound in hiring after the sharp fall in March (see over). Weak data plus a broadly stronger USD should equal USD/CAD taking a run towards the 1.0100/50 area at least. USD/CAD is barely changed net on the week.
Both the AUD and NZD have dropped some 2.5-3%. There may be some CAD catch up to come at least.
Technically, we had a very strong close for USD/CAD yesterday—the market formed a bullish key reversal day, with the bounce occurring around important retracement support and amid very oversold conditions.
That suggests an important short/medium-term low is in for the market now. We expect solid support on dips and more USD gains above 1.0100/50.