The Canadian dollar got beaten up yesterday morning, recovered in the afteronnon and consolidated its gains overnight.  After touching 1.2589 yesterday afteroon, USDCAD settled into a 1.2490-1.2532 overnight.

It is currently probing support in the 1.2490 area thanks to a much better than expected Canadian Manufacturing Shipments report  for August. (Actual 1.6% vs. forecast 1.0%).  However, the combined July- August rate is still a negative 1.0%.  In addition, weaker than expected US Building Permits (Actual Building Permis change -4.5% vs forecast -2.9%,) and Housing Starts data, (Actual -4.7% vs. forecast -0.5%)  undermined the US dollar.  The US data should be taken with a grain of salt due to the impact of Hurricanes in September.

Fed succession stories have underpinned the US dollar.  President Trump is interviewing candidates for Chair of the Federal Reserve.  Like any good horse race, the front-runners change leads, frequently.  The current favorite is John Taylor, of “Taylor rule” fame.  If incumbent Janet Yellen is offended by having to be interviewed for the job she already has, she should be.

USDJPY rallied on the assumption of a “hawkish” candidate winning Yellen’s seat, rising from 112.14 to 112.91 in New York trading.

NZDUSD was weighed down by disappointment from yesterday’s GlobalDairyTrade auction results and dropped from 0.7176 to 0.7121 at today’s open. AUDUSD  continues to consolidate in a 0.7820-56 range.

EURUSD was steady and held above support at 1.1720, grinding in a 1.1731-79 range.  The lull in political uncertainty in Spain and the debate around the next Fed Chair appears to have limited volatility.

Sterling flatlined in Asia and Europe but bounced erratically around the UK employment report, which was responsible for the entire 1.3142-1.3211 range.  The unemployment rate was unchanged at 4.3%, and average hourly earnings were 2.2% (forecast 2.1%)  Prices quickly reverted to pre-data levels at 1.3165.

Oil prices were steady.  WTI traded in a narrow $51.94-$52.15 band and ticked up to $52.28 this morning. Traders are looking for a drop in US crude inventory data today, to underpin prices.

USDCAD Technical outlook:

The intraday and short term USDCAD technicals are bullish while prices remain above the 1.2490-1.2500 area. However, it will take a break above 1.2560 to suggest yesterday’s down-move was just a correction.  A break below 1.2490 will confirm a double top at 1.2590-00 and suggest further weakness.  If 1.2430 is breached, it would suggest that the 1.2200-1.2600 range is still intact.

Today’s Range 1.2490-1.2550

Chart: USDCAD 4 hour