USDCAD extended yesterday’s NAFTA and oil fueled losses overnight, but with far less intensity. Today is the day that US House Speaker Paul Ryan said was the deadline for a NAFTA deal if the 2018 Congress was going to have a chance to pass it. USDCAD dropped from 1.2870 to 1.2780 yesterday and extended those losses to 1.2751 overnight.

Various press reports indicate very little chance of a deal getting inked today. The Globe and Mail reports about the “skinny option,” a plan where Mexico and Canada agree to tougher auto content rules while the US leaves everything else unchanged.

 Arguably, a deal drives USDCAD toward 1.2500 while no-deal puts 1.3000 in play. There are other factors at work.  The US dollar is in demand because of rising interest rates 10-year US Treasury yields touched 3.11% overnight (They have since drifted down to 3.095%) which is underpinning US dollar demand.  Oil prices have cushioned the blow, somewhat.  Brent crude hit $80.14/barrel overnight while WTI oil traded at $72.28/b.

The prospect of US rates rising faster than domestic rates suggests USDCAD losses from a NAFTA deal would not be sustained.

Overnight, FX activity was choppy but the US dollar opened in New York, relatively unchanged compared to yesterday’s close.  The Japanese yen was the biggest loser.  USDJPY dipped to 110.08 in Asia and then soared with rising Treasury yields, reaching 110.73 where it opened in New York.

A reasonably positive but still soft, Australia employment report lifted AUDUSD to 0.7545 from 0.7505 but those gains faded.  It opened in New York  with a negative bias, at 0.7527.

NZDUSD climbed from 0.6894 to 0.6936 after the New Zealand governments budget predicted a larger surplus for the year. That move didn’t last and prices dropped to 0.6887 at this mornings open.

EURUSD traded erratically in a narrow range as profit-taking buyers ran into “sellers on rallies.’ Apparently Italian politicians have scrapped their plan to ask for debt forgiveness. Rising Treasury yields and the risk of strong US economic data continues to put downward pressure on EURUSD.

Sterling rallied in Asia, sank in Europe and opened in New York just a tad higher than where it was at the close The UK government dismissed a report that it would consider staying in the EU customs union.

The US dollar should get support from this mornings release of the Philadelphia Fed Manufacturing Survey (forecast 21.0) and Initial Jobless claims (forecast 215,000).  The quarterly Bank of Canada review is due today.

USDCAD Technical Outlook

The intraday technicals are bearish while prices are below the 1.2830-50 area. but unless support in the 1.2750 area is taken out, the downmove is just a correction.  The uptrend from the beginning of February is still intact while prices are above 1.2650..   for today, USDCAD support is at 1.2750 and 1.2690.  Resistance is at 1.2805 and 1.2830.

Today’s Range 1.2750-1.2850