Canadian inflation surged in July.  CPI rose 3.0%, y/y, well above the forecast of 2.5% and Junes result.  Core-CPI was just as impressive, rising 1.6% y/y, handily beating the 1.3% forecast.  The headline figure is at the top of the Bank of Canada’s 1-3% inflation range and may have pulled the next rate hike forward to the September 5 meeting.  However, enthusiasm should be tempered as Statistics Canada said that energy prices contributed the most to the year over year data.

USDCAD plunged from 1.3157 to 1.3067 on the news.  The domestic news may support the Canadian dollar, but the more significant risk to the Loonie is Canada’s exclusion from the last month of Nafta talks.  Yesterday, President Trump said, “We’re not negotiating with Canada right now.” Canadian officials continue to downplay the negatives.  Global developments are another concern and a swing to safe-haven trades is a reality.   National Economic Council Director Larry Kudlow said that the US would impose more sanctions on Turkey if the American pastor wasn’t released.  The comments were made yesterday, but USDTRY didn’t react until this morning when is rallied from 5.7551 to 6.3299, a 9% gain.  Prices have since back-off to 6.1250

Newly appointed US Special Representative for Iran Brian Hook said that the US is ready to impose sanctions on countries that import Iran oil, including China, India, and South Korea.  The European Union is opposed to the US sanctions.  As far as they are concerned, Iran is complying with the Nuclear Treaty, and the US does not have the authority to unilaterally repudiate the treaty which was signed by the EU, (and Germany) UK, Russia, France, and China.

Asia equity indices rallied, except for the Shanghai Shenzhen CSI 300 which dropped 1.44% and is down 20%, year-to-date.  European indices are in negative territory thanks to the fresh Turkey concerns and US equity futures point to a lower opening on Wall Street.

The US dollar has seen plenty of to-ing and fro-ing since Monday’s New York open, but it managed to eke out gains against all the majors as of this morning.  EURUSD was unchanged, and Kiwi inched higher.  None of the moves is significant.  The underlying bullish US dollar trend is intact

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish following the break below 1.3120 and 1.3080 which negated this week’s uptrend and warns of further losses to 1.3000-10 which represents the uptrend line from the February 1 low.  For today, USDCAD support is at 1.3040 and 1.3010.  Resistance is at 1.3080 and 1.3120

Today’s Range 1.3030-1.3120