The eurodollar gained against the Canadian dollar after Statistics Canada reported worse than anticipated manufacturing sales for April. Notably, the trade balance data from the eurozone was also well below the market’s expectations. Nevertheless, being a trade surplus, albeit small, the market did not give much importance to the weak data. Secondly, the fall in the price of crude oil, which is one of the top export revenue earners for Canada, also aided the euro dollar’s uptrend. In the past 24 hours, the EUR/CAD pair has appreciated from a low of 1.5280 to a high of 1.5390.
The Eurostat reported that trade surplus declined to €1.20 billion in April, from €25.50 billion in the earlier month. Economists had anticipated a trade surplus of €20.30 billion for the reported period.
According to the first estimate, the Eurozone exported goods worth €136.60 billion to the rest of the world in April 2010, down 29.3% from €193.30 billion worth of exports in the similar period last year. Similarly, the import of goods from the rest of the world into the Eurozone fell 24.8% y-o-y to €133.70 billion, from €177.80 billion last year.
During the US session, Statistics Canada reported a record 28.5% m-o-m decline to C$36.40 billion in manufacturing sales in April, following a 9.8% drop in the earlier month and worse than the 20.2% decrease anticipated by economists.
Sales declined in all 21 sectors, driven by a sharp drop in the transportation machinery and petroleum and coal goods industries. In volume terms, manufacturing sales declined by a record 26%, indicating a decrease in the volume of products sold in April.
More than four-fifths (85.2%) of firms in the manufacturing industry have acknowledged that their operations were affected by COVID-19. Manufacturers in the printing and associated products (95.6%), transportation machinery (93.7%), furniture and related product (93.7%), computer and electronic product (91.6%), textile mills (92%), and clothing (91%) industries reported operating at diminished capacity or terminated operations totally in response to a decrease in worldwide demand or to conform to social distancing initiatives.
All motor vehicle assembly plants suspended operations in April, while several motor vehicle spare parts suppliers in North America operated at limited capacity or shut down operations. Sales decreased for the fourth successive month in the petroleum and coal product sector, declining by a record 46.4% to $2 billion in April. Sales in the food industry dropped 12.8% to $8.70 billion in April, following a 9.9% increase in March. Fabricated metal products recorded a decline of 26.1%. Likewise, plastic and rubber posted a 31% drop.
In the commodity market, WTI crude lost 2.76% to trade at $35.26 per barrel, while Brent crude lost 1.32% to trade at $38.22 per barrel. The decline in crude prices also acted as a drag on the loonie as Canada is very much dependent on revenue generated from crude exports.
The weak manufacturing sales data and a decline in crude price are expected to keep the EUR/CAD pair range-bound with a slight bullish bias.
Even though fundamentals favor a short-term rally in the EUR/CAD pair, technical indicates otherwise. The currency pair is facing resistance at 1.5395. The next support is anticipated near 1.5190. Additionally, the stochastic oscillator is making lower highs. Therefore, we are anticipating the currency pair to move down in the short-term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
