Riskier Currencies Soared on Monday. What Caused the Rally?  

Canadian Dollar Going Nowhere

The strength of the US dollar is influencing the Canadian dollar. This morning, sentiment is somewhat pessimistic, owing to yesterday’s lower-than-expected ADP employment report. According to ADP, the United States gained 374,000 jobs in August. Forecasters predicted growth of 613,000 people.

Traders promptly reduced their forecast for Friday’s nonfarm payrolls (NFP). The lackluster employment statistics put less pressure on the Fed to start tapering.

The association between ADP and NFP outcomes, on the other hand, is low. Traders who sell US dollars in anticipation of a weak NFP report may be severely disappointed. A positive surprise to the NFP 750,000 projection would reignite the talk of tapering and rate hikes, boosting the US dollar.

To the chagrin of some traders, the Organization of Petroleum Exporting Countries said it would boost September output by 400,000 barrels per day. It hoped that the reappearance of COVID-19 Delta-variant instances and slower Chinese growth would push the cartel to postpone the rise.

Firm crude prices are helping to underpin the Canadian currency. A dismal Canadian Merchandise Trade Report (expected $1.48 billion vs. $3.22 billion in June) will not influence FX. The overnight session was rough, but ranges held.

 

EUR/USD

 

EUR/USD is trading near the top of a tight $1.1835-$1.1855 range in early New York trading. Furthermore, recent comments from European Central Bank officials have fueled anticipation that the ECB may announce a tapering program at its meeting next week. Above $1.1770, the EUR/USD technicals are positive. GBP/USD rose with EUR/USD in an unremarkable session, moving from $1.3769 to $1.3800. Prices may struggle to grow further, in part because a string of harmful economic data has lowered the likelihood of the Bank of England tightening.

 

The Australian Dollar

 

The Australian dollar remained around three-week highs on Thursday. An increase in vaccinations and recent good economic data gave investors hope that stringent COVID-19 restrictions relaxed in the coming weeks.

The Australian dollar was trading at $0.7365, up 0.7 percent from overnight resistance near $0.7384. Support locate between $0.7330 and $0.7285. Data released on Wednesday showed that the Australian economy avoided a technical recession in the second quarter, boosting currency gains. At the same time, a record trade surplus for July contributed to the positive picture.

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