Another month bites the dust. The US dollar opened on a mixed note compared to last nights close with a whiff of risk aversion sentiment wafting in the air.  EUR, JPY and CHF rallied while GBP, CAD AUD and NZD gave up a little ground.  US Trade Representative Robert Lighthizer’s cautious comments about the state of the China/US trade talks yesterday may have encouraged equity traders to lighten positions.  Asia equity indices closed with losses, European bourses are down, and US equity futures point to a negative open on Wall Street.

Modestly weaker than expected China February PMI data contributed to the commodity currency bloc selling pressure.  USDJPY couldn’t crack 111.00 and prices traded down to 110.75, where it opened in New York. 

The European session wasn’t a whole lot busier. There was a lot of Eurozone data, but EURUSD traders largely ignored it.  GBPUSD continues to ebb and flow with Brexit headlines, although the break above 1.3295-00 area suggests further gains ahead.  Prices are supported by talk that Brexit negotiations could be extended for another two years.

February was a good month for the US dollar.  Not so much for the rest of the G-10 majors except Sterling.  GBPUSD rose 1.85% between the February 1 open and this morning’s open, thanks to diminished “no-deal Brexit” risks.  AUDUSD was the biggest loser, dropping 1.72% after the RBA turned dovish. 

President Trump bailed early from his meeting with North Korea’s Kim Jong-Un. North Korea wanted all sanctions lifted while the US wasn’t prepared to agree to his wishes.

 The weekly Energy Information Administration (EIA) oil stocks data reported an 8.65 million barrel drop in US crude inventories. WTI oil prices rallied to $57.35/barrel but slipped overnight to $56.45.  The drop was likely a mixture of mild disappointment about the pace of the China/US trade talks and profit taking.

USDCAD is tracking WTI moves.  Yesterday’s domestic inflation data at 1.4% was slightly worse than the 1.5% that was expected and that underpinned USDCAD.  However, Stats Canada tweaked the report which makes comparisons to the previous data somewhat sketchy.

It should be a busy New York session.  US Q4 GDP (forecast 2.3%), Q4 Personal Consumption/Expenditures (forecast 1.5%)  Initial Jobless Claims, and Chicago PMI are on tap. Canada data includes Current Account and Raw Materials Price Index.  Month-end portfolio rebalancing flows suggest US dollar selling.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are above 1.3150, looking for a break of resistance in the 1.3180 area to extend gains to 1.3230.  A move below 1.3150 targets 1.3080. Longer term, USDCAD needs to break above 1.3260 to refocus on 1.3370. While prices are below 1.3220, prices are targeting 1.3110 and then 1.3060.  Today’s Range 1.3110-1.3180