USDCAD dropped following the Canadian inflation report. January CPI was 1.7% y/y, a tad higher than the 1.4% forecast but lower than December’s 1.9% print. Core CPI was unchanged at 1.2%, y/y over the same period. USDCAD dropped to 1.2640 from 1.2705 but has since moved back higher.
The outlook for USDCAD is for another test of the 1.2760 resistance area due to general US dollar strength, widening CAD/US interest rate differentials, and lingering Nafta negotiation concerns. However, pre-weekend profit taking may limit gains today.
FX markets were a tad subdued overnight. EURUSD consolidated in a 1.2280-1.2386 range. German Q4 GDP data at 2.3% and a 1.7% rise in Eurozone Core CPI (forecast 1.6%) didn’t have much impact on the single currency.
Sterling got a bit of a bounce from news that PM Theresa May and 11 senior ministers reached a compromise on the UK’ s proposed trading strategy with the European Union but retreated at the New York open.
USDJPY traded higher in Asia, rising from 106.67 to 107.11 but reversed most of the move during the European session. The Nikkei finished with a gain of 0.72%
New Zealand Retail Sales were stellar (Actual 1.7%, q/q vs forecast 1.4%, ex-autos Actual 1.8% vs forecast 0.8%) However NZDUSD got clocked and AUDNZD demand got part of the blame for the move.
WTI oil prices held on to yesterday’s gains and traded in a $62.36-$62.90 range. Prices are supported by optimism that Opec and Russia production management cooperation will continue. It helped that the EIA reported a drop in US crude inventories, yesterday.
The US dollar had a pretty good week, suggesting it is ripe for a Friday profit-taking sell-off. There isn’t any US data of note. Three fed speakers are on tap (Dudley, Mester and Rosengren) but there remarks will be overshadowed by Fed Chair’s Congress testimony, on Wednesday
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish with this mornings break below 1.2670, which sets up a test of 1.2570 on a move below 1.2610. A move above 1.2670 shifts the focus back to yesterday’s 1.2755 peak. For today, USDCAD support is at 1.2640, 1.2610 and 1.2570. Resistance is at 1.2670, 1.2710 and 1.2750
Today’s Range 1.2640-1.2730