The US dollar dropped against the majors following disappointing Retail Sales and inflation reports. June Retail Sales were negative 0.2% instead of the 0.1% increase that was expected. June CPI rose 0.1% vs. forecast for a 0.2% gain

The FX reaction was immediate.  EURUSD jumped to 1.1445 from 1.1410, GBP popped to 1.3007 from 1.2968 and USDJPY plunged to 112.45 from 113.05.

USDCAD dropped to 1.2698 from 1.2725. it is well within the post-Bank of Canada rate hike range of 1.2660-1.2770.

Fed Chair Janet Yellen’s second day of testimony on Thursday didn’t add anything new.  She is still cautious which traders take to mean a third rate hike in 2017 is becoming more doubtful.  The odds for a December rate increase were 47.3 % prior to this morning’s data and 43.1% afterwards.

Overnight trading was rather dull ahead of today’s US data. AUDUSD inched higher throughout the overnight session, supported by improved risk sentiment. NZDUSD traded sideways and then eased lower in early New York trading. Ranges for both currency pairs were narrow.

USDJPY rose in Asia, dropped in Europe, and opened in New York, unchanged

EURUSD drifted higher.  The Eurozone trade balance widened to €19.7 billion from €19.6 billion but no one cared.  Liquidity was reduced do to Bastille Day in France.

Oil prices extended gains from yesterday.  WTI rose to $46.42/b., a 5.8 percent gain since Monday’s opening level.  Traders are focusing on the IEA’s forecast for higher demand in Q@ while reducing estimates for non-oil production.  On the other hand, it could just be added profit taking inside the $42.00/-$47.00/b range that has held moves for the past two weeks.

There is more USD data on the way. Weaker than expected Capacity Utilization, Industrial Production, and Michigan Consumer Sentiment Index reports could add to the dollar’s woes.

USDCAD Technical outlook:

The intraday USDCAD technicals are neutral inside a narrow 1.2720-70 trading range.  A break above 1.2770 would extend gains to 1.2830 while a move below 1.2720 would target 1.2680. The break of 1.2772, the 76.4% Fibonacci retracement level of the 2016-2017 range has hung a target on the 100% Fibonacci retracement level, of 1.2458.   For today, USDCAD support is at 1.2720 and 1.2660.  Resistance is at 1.2770 and 1.2820.

Today’s Range 1.2670-1.2750

Chart: USDCAD 30 minute