The Canadian dollar is merely a bystander watching the White House circus roil global financial markets. The US Justice Department appointed the former boss of the FBI, Robert Mueller, to lead an investigation into ties between the Trump Campaign and Russia,

Financial markets reacted like it was an inquiry into President Trump and why he fired James Comey.  It’s not.  (At least not yet) Still, the US dollar dropped like a stone against the majors.  Meanwhile, USDCAD traders were fixated on oil prices.

Overnight, the dollar free-fall took a breather.  After initial losses in early Asia, the US dollar inched higher throughout the European session opening in New York with modest gains against everything except for Sterling and Yen.

This morning better than expected Jobless Claims report and Philadelphia Fed Manufacturing survey have given the greenback another layer of support.

In Europe, comments from ECB officials and the Bundesbank President reminded traders that sooner or later, ECB tapering would be a reality, which helped to temper EURUSD selling enthusiasm.

Sterling powered through the 1.3000 level and it hasn’t looked back. UK Retail Sales in April were a healthy 4.0% (forecast 2.0%) GBPUSD soared from 1.2938 to 1.3045 on the news. It has since dropped back to 1.3012 in New York trading.

USDJPY tried a rebound in Asia and managed to climb from 110.53 to 111.40 in early European trading. That was it.  Yen demand on risk aversion drove USDJPY to 110.28 as New York opened. It rallied again in New York trading due to this morning’s strong economic reports.

AUDUSD rallied on the back of a better than expected employment report but the gains were not sustained. AUDUSD touched 0.7465 before sinking in Europe and opening in New York at 0.7420.

Kiwi traded sideways a 0.6925-0.6948 range with a modest bearish bias.

Oil prices drifted inside a narrow $48.77-$49.12/b range in Asia and until mid-morning in Europe. Sellers emerged on concerns that US crude inventories and production will more than offset Opec production cuts. A Reuters story that 10 million barrels of US crude are on oil tankers heading to Asia may have added to the selling pressure.

For the rest of the day, FX markets will still be fixated on Washington while USDCAD direction will be decided by broad US dollar sentiment and oil prices.

USDCAD Technical outlook:

The intraday USDCAD technicals are bullish following the break above 1.3640 after touching the base of the uptrend line at 1.3570.  A break above 1.3700 sets the stage for added gains to 1.3850. A move below 1.3570 would extend losses to 1.3510.

Today’s Range 1.3570-1.3660

Chart: USDCAD 1 hour