USDCAD dropped from 1.2920 to 1.2837 following a 2.2 %, y/y gain in inflation for February.  Retail Sales gained 0.3% in January, below the 1.1% predicted.  However, the inflation data opens the door for another BoC rate hike, sooner than expected.  Overnight, USDCAD traded sideways.  The sentiment is mixed to bearish because of the move below major support at 1.3015 and 1.2950.  However, weak equity markets and trade war concerns may limit USDCAD losses.

US Durable Goods Orders rebounded, rising 3.1% in February, well above the 1.5% forecasts but not enough to recoup January’s 3.5% decline.

President Trump is at it again. Early last night, he fired his second National Security Adviser Lt. General H. R. McMaster and replaced him with John R. Bolton, described by the New York Times as a hard-lined former American ambassador to the United Nations.  Earlier, he levied fresh trade tariffs on around $60 billion worth of Chinese imports, which will be identified in 15 days.

FX markets reacted rather calmly.  USDJPY broke support at 105.20 and dropped to 104.65 in Asia while USDCHF fell from 0.9515 to 0.9446. Wall Street reacted more violently.  The DJIA dropped 2.93%.  The S&P 500 and the NASDAQ were not far behind, down 2.52% and 2.43%, respectively.

Asia and European equity indices took their cue from Wall Street.  The Nikkei 225 lost 4.51%.  In Europe, the German Dax have recovered from their worst levels but are still down on the day.  US equity futures are pointing to a flat to down opening on Wall Street.

China responded to the US tariffs by putting new taxes on about $3 billion of US imports which added to the overnight equity market jitters.

FX markets were a sea of tranquility compared to equity markets.  EURUSD rose in early Asia and then spent the rest of the time in a 1.2317-48 range.  GBPUSD  drifted down from 1.4124 to 1.4084.  Traders did not seem to care about the news the EU  Council agreed to the Brexit transition terms.

Oil prices popped higher overnight, underpinned by a report that Saudi Arabia Energy Minister said Opec and Russia would need to keep coordinating supply cuts into 2019.  WTI rallied from $64.15 to $65.35.  Prices have since retreated to $64.50/barrel

 USDCAD Technical Outlook

The intraday USDCAD technicals are bearish with the downtrend from 1.3110 intact while prices are below the 1.2940-50 area.  A break above 1.2960 will test resistance in the 1.2990-1.3000 area.  A move below 1.2890 will target 1.2790.  For today, USDCAD support is at 1.2890 and 1.2830.   Resistance is at 1.2960 and 1.3000

Today’s Range: 1.2810-1.2910