Overnight Range 1.3041-1.3118    

The US inflation data came out as expected which foiled those hoping to restart the argument for faster rate increases by the Fed.

The Bank of Canada policy meeting and Monetary Policy Report are released this morning and USDCAD moved higher overnight.  The two are not related.  USDCAD gained on broad US dollar demand vs. the majors, profit taking from yesterdays decline and a drop in oil prices.

Aussie and Kiwi backed off of Tuesday’s highs in a subdued session with narrow ranges. Traders are awaiting today’s US CPI data and a speech by Janet Yellen.

USDJPY climbed from 112.55 to 113.56, bolstered by profit taking, a bump in US Treasury yields and caution ahead of the US inflation data.

In Europe, EURUSD traded erratically within a narrow 1.0676-1.0715 and started the New York session near the bottom of that range.  Eurozone CPI was 1.1%, y/y for December as expected and no reason to buy EURUSD.

GBPUSD started the Asia session at its peak of 1.2416 and it never saw that price again. It slid steadily and opened in New York at 1.2309.  The UK unemployment rate was unchanged at 4.8%.  The Mayor of London, Sadiq Khan, wants business leaders to push back against Theresa May’s “hard Brexit” plan.  Bloomberg reports he said “If we continue on this path — towards a ‘hard Brexit’ — we risk having to explain to future generations why we knowingly put their economy, their prosperity and their place on the world stage in such peril.”

Oil prices rose from $52.44 in Asia to $52.76 in early European trading.  Then the bottom fell out and prices dropped to $51.32 (currently).  Concern about rising US oil supply and a firmer US dollar undermined crude prices.

USDCAD direction continues to be steered by oil price swings and broad US dollar sentiment.

Today could be quite volatile.  FX traders are already on edge following the sharp swings in US dollar direction and sentiment.  Traders are looking past expected US dollar gains from Trump’s fiscal stimulus policies and raising concerns that Trumps protectionist trade plans could hurt US economic growth.  Fed Chair Janet Yellen’s speech could unleash a wave of dollar selling if her remarks are doveish as the “pain” trade appears to be selling US dollars.

The Bank of Canada may be content to hide in the shadows, leaving policy unchanged.  However, upgraded growth forecasts could lead to chatter of rate hikes and USDCAD would sink.

Open High Low
USDCAD 1.3086 1.3099 1.3041
EURUSD 1.0687 1.0714 1.0676
USDJPY 113.38 113.48 112.57
GBPUSD 1.2310 1.2413 1.2291
USDCHF 1.0025 1.0044 1.0014
AUDUSD 0.7551 0.7564 0.7540
NZDUSD 0.7202 0.7216 0.7191
WTI 51.74 52.76 51.58
Close 4:00 pm EDT-Open 6:00 am EDT


USDCAD Technical outlook:

The intraday technicals are bullish while prices are above 1.3060 and looking to test the downtrend line, currently at 1.3150. However, the bigger trend is bearish while prices are below the 1.3240 which keeps the focus on support in the 1.2990-1.3010 area.  A break below 1.2990 would extend losses to 1.2893 which is the 61.8% Fibonacci retracement level of the May 2016-December 2016 range.  For today, USDCAD support is at 1.3060 and 1.3010.  Resistance is at 1.3140 and 1.3180.

Today’s Range 1.3050-1.3150

Chart: USDCAD 4 hour