USDCAD Range 1.3192-1.3308 

The US dollar’s tentative bid gained a lot of confidence following this morning’s modestly better-than-expected US Jobless claims data and an upward revision to 2Q real GDP. (GDP revised up from 2.3% to 3.7% saar) The dollar also took solace in some comments by Kansas Fed governor, Ester George, stating that “a rate hike is on the table at every Fed meeting”. Those remarks contrast sharply with New York Fed’s Dudley’s comments, on Monday.

Late yesterday, US equity markets rebounded following a speech by New York Fed President, Dudley (voting FOMC member) that apparently reduced the prospect of a September rate hike. That sentiment cared into Japan and helped the Nikkei rally. Not so in China. Chinese equity indices were down until the last hour of trading. The government of China finally reacted. They intervened and turned a 0.7% decline in SHCOMP to a 5.4% gain. Oh, what a relief it is.

Meanwhile oil prices soared. At one point WTI gained 1.76% and USDCAD dropped in concert, falling from 1.3303 to a low of 1.3192. However, the WTI down trend from June remains intact while trading below $40.80/b. The oil rally has stalled and USDCAD has bounced, aided by today’s US data.

Looking ahead, month end demand for dollars and anticipation of a strong Michigan Consumer confidence report on Friday, suggests that we have seen a short term low in USDCAD and another visit to 1.3350 is likely, especially if oil resumes its decline.

Technical Outlook

The intraday technicals are bearish while trading below 1.3270. However, the bounce from 1.3190 and the subsequent rally above 1.3240 has hung a target on that downtrend. A break above 1.3270 will negate the downside pressure and lead back to 1.3350. A failure at 1.3270 means a retest of 1.3190.

Today’s Range 1.3190-1.3270