Canada May GDP soared 0.5%, beating the 0.4% forecast and well ahead of April’s 0.1% gain. The Loonie soared on the news, but the gains were short-lived due to renewed Nafta fears. National Post reporter Tom Blackwell wrote that “American officials rejected Canada’s bid to take part in senior-level Nafta talks between the US and Mexico later this week.”  USDCAD popped from 1.3026 to 1.3095 in early Asia on the news.  The article says that the US wants to use a Mexico deal as leverage to extract concessions from Canada.

USDCAD is torn between Nafta collapse fears and robust domestic data.  The Nafta fears may have reinforced support in the 1.2990 area, even though the US/Mexico trade meeting for this week, was well-known.  Canada was never included.

USDCAD traded in a 1.2995-1.3095 since early Asia and prices are in the middle of that range.  The impact from the Canadian economic data has already faded, and traders are looking ahead to Wednesday’s FOMC meeting.

The overnight session was busy.  The Bank of Japan left rates and ultra-easy monetary policy unchanged.  They also said they would keep “very low rates for an extended period of time.”  USDJPY climbed to 111.58 from 110.97. The rally was extended in New York trading, and prices are flirting with resistance in the 111.90 area.

AUDUSD rallied from 0.7406 to 0.7432 after Australia June Building Permits rose 6.4%, m/m (forecast 0.0%) despite China NBS Manufacturing PMI for July being a tad weaker than forecast.

EURUSD traded sideways in Asia and climbed in Europe.  Eurozone data was mixed.  Q2 GDP, shrank to 2.1% (forecast 2.2%, q/q) while July CPI rose 2.1% (forecast 2.0%) core CPI was 1.1% (forecast 1.0%).  The low core CPI reading supports the ECB stance of unchanged interest rates until next summer.  EURUSD traded up to 1.1730 from 1.1701 but was unable to hang on to the gains.  Steady US PCE data and a firm consumer Confidence reading drove EURUSD down to 1.1697 where it sits now.

GBPUSD rose from 1.3114 to 1.3161 on month-end demand and position adjusting ahead of Thursday’s Bank of England policy meeting but reversed the move in New York trading

Traders will be cautious ahead of tomorrow’s FOMC meeting.  The meeting is expected to be benign, but there is a risk of a hawkish tweak to the statement.

USDCAD Technical Outlook

The intraday USDCAD technicals are mixed and useless thanks to the pending GDP data release.  They are bearish while below 1.3070 and bullish above 1.3020.  A weaker than expected report will blast prices above 1.3070 to 1.3150..  A stronger than expected report would lead to a test of 1.2990 and perhaps 1.2950.  The daily uptrend line from the February low comes into play at 1.2950 which is also the 38.2% Fibonacci retracement level of the February-June range.

Today’s Range 1.2960-1.3060