Canadians are returning from a long weekend to find the US dollar a tad firmer than where they left it on Friday.  The US dollar rallied on Monday but gave back most of those gains in overnight action.

German politics pressured EURUSD yesterday, but news that Angela Merkel caved in to her coalition partners demands on migration supported the single currency in Asia.  A drop in Retail Sales offset eurozone PPI data improvements.  EURUSD rallied from a low of 1.1592 yesterday to 1.1672 in Europe and is currently trading at 1.1650. Divergent ECB and Fed interest rate policies will continue to weigh on the currency pair.

GBPUSD traded in a 1.3095-1.3206 range since Friday’s close.  Broad US dollar strength supported by a better than expected US ISM Manufacturing PMI report yesterday (Actual 60.2 vs May 58.7) drove GBPUSD to its low.  Those losses were recovered in Europe today when UK Contraction PMI surprised to the upside.

USDJPY chopped about in a 110.48-111.12 range with plenty of travel time in between.  Strong US data and higher Treasury yields boosted the currency pair while fear of risk aversion trading from lingering trade tensions capped gains.

The Reserve Bank of Australia (RBA) left interest rates unchanged. AUDUSD rallied when the statement was not as dovish as expected, climbing from yesterday’s low of 0.7310 to 0.7399 in early New York trading.

NZDUSD was the weakest major G-10 currency.  It dropped from 0.6792 yesterday to 0.6689 in early Asia trading today.  Prices have recovered to 0.6734 in New York trading.

USDCAD rallied on the back of strong US data yesterday, rising from 1.3132 to 1.3222 in Asia.  The entire move was erased in Europe and in early Toronto trading.  The elevated trade tensions between Canada and the US will limit Canadian dollar gains.  At the same time, the Bank of Canada is expected to raise interest rates on July 12, which should limit losses.  USDCAD is likely to trade with a bullish bias in a 1.3050-1.3400 range this week.

Today’s economic reports from the US and Canada should not have an impact on FX markets. The US July 4 holiday tomorrow will.  Trading will be quiet by this afternoon and likely until the US and Canadian employment reports on Friday.

USDCAD Technical Outlook

The USDCAD technicals are bullish while prices are above the 1.3100-20 level, supported by a  double bottom at 1.3120 A break below 1.3120 would extend losses to the long term uptrend base of 1.3000  The intraday technicals are bearish with the move below 1.3190, looking for a break of 1.3100 to lead to 1.3050.  For today, USDCAD support is at 1.3120, 1.3100 and 1.3050.  Resistance is at 1.3180