This morning’s US data missed the mark. CPI  rose (0.5% (forecast 0.5%, m/m) and Core CPI rose 0.1% (forecast 0.1%, m/m). The US dollar which had drifted higher on anticipation of better than expected data, quickly reversed course.Wednesday’s FOMC minutes highlighted the committee’s concern with low inflation and today’s data did nothing to alleviate those concerns

Headline Retail Sales rose 1.6% (forcast 1.5%) and Retail Sales, ex-autos rose 1% (forecast 0.8%). That data didn’t do anything for the greenback.

FX markets were very quiet overnight.  The US dollar opened virtually unchanged against the Canadian dollar and Euro while drifting lower against the rest as trades waited for today’s US economic reports.

Sterling was the story yesterday, and it was front an centre overnight. GBPUSD extended Thursday’s gains in Asia, rallying to 1.3322.  Brexit news is the driver and headlines have led to a GBPUSD range of 1.3122-1.3322 in the past 24 hours.

The BBC and Handelsblatt yesterday, are reporting that a two year transition period is a possibility. The soft Brexit result is behind Sterling’s rally.

EURUSD climbed to 1.1850 in Asia and then traded lower in Europe. Traders are dealing with a Bloomberg report that the ECB was considering tapering QE by 30 billion/month. EURUSD rallied back to 1.1867 after the CPI data.

USDJPY was unable to rally in Asia and dropped from 112.44 to 111.87 in Europe on profit-taking ahead of the US data. Prices dropped to 111.70 after the US data.

WTI oil soared on news that China imported 9 million barrels per day in September  Price also got a bit of boost from increased unrest in the Middle East.  Kurdish fighters and Iraqi forces may clash around the Kirkuk oil field.  WTI climbed from $50.65 to $51.67/b. in New York.

USDCAD was sidelined.  Traders are assessing the risk from bearish USDCAD technicals targeting 1.2340 and firm crude prices against a data-driven, US dollar rally.

There are a slew of Fed speakers including Jerome Powell, who is reportedly Treasury Secretary Steve Mnuchin’s pick to replace Fed Chair Yellen. Traders may give his words a little more weight than they will for speeches from Chicago Fed President Charles Evans, Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan.  Meanwhile, avoid walking under ladders, black cats and Jason Voorhees.

USDCAD Technical outlook:

The intraday USDCAD technicals are bearish while prices are below 1.2490. They are looking for a move below 1.2440 to extend losses to 1.2405 and then 1.2340.  A break above the 1.2490-1.2505 zone targets 1.2560.  The longer-term outlook is that USDCAD is in a downtrend while prices are below 1.2620.  The current USDCAD rally is merely a correction with a break of 1.2400 pointing to a retest of 1.2040.  For today, USDCAD support is at 1.2440 and 1.2405.  Resistance is around 1.2490-1.2505 and 1.2540.

Today’s Range 1.2410-1.2490

Chart: USDCAD daily