USDCAD Overnight Range 1.3970-1.4060        

USDCAD failed to build on Friday’s afternoon selling pressure when trading resumed in Asia to start the new week and month. In fact, FX risks from the China PMI data failed to materialize-the data was in line with expectations. Selling of Aussie and Kiwi ahead of the numbers was quickly reversed. USDJPY failed to extend gains from Friday’s BoJ announcement of negative rates and traded sideways.

Europe had a subdued yet choppy market.  Comments from ECB officials tempered enthusiasm for additional stimulus in March. GBPUSD rallied into PMI data and the reversed course afterwards.

The December FOMC “dot-plot” indicated that there would be 4 rate hikes in 2016 but the January market turmoil led to many traders and analyst believing that the Fed would only hike once or twice. Last week’s FOMC statement did not appear overly concerned about the turmoil.  Today’s ISM Manufacturing PMI could support March policy action.

This morning US Core PCE data was on the soft side in December but prior month, upside revisions took the sting out the data.  The US dollar has picked up ground against the commodity bloc while retreating against the European currencies, although none of the moves are substantial.

USDCAD has dropped big-time with the rally in crude oil prices.  The rationale for the gain in oil prices is flimsy-hopes and rumours of Opec and non Opec members addressing over-production.  The reality is that there isn’t even a meeting scheduled. As WTI prices consolidate their gains USDCAD will consolidate its losses.

USDCAD technical outlook

The intraday USDCAD technicals are bullish while trading above 1.4005 looking for a break above 1.4065 to extend gains to 1.4150.  A move below 1.4000 targets 1.3950 and then 1.3900.  For today.  USDCAD support is at 1.4005, 1.3970 and 1.3950.  Resistance is at 1.4060, 1.4090 and 1.4150

Forecast Range for the day 1.3970-1.4050

Chart USDCAD 4 hours