Overnight Range   1.3031-1.3156                

The Canadian dollar got hammered.  The USDCAD rally started in Europe and then accelerated in New York trading.  The International Energy Agency (IEA) released a less-than upbeat forecast for global oil demand.  The EIA said that global oil demand growth is slowing faster than initially predicted due to a more pronounced third quarter slowdown. WTI dropped from $46.04 at yesterday’s New York close to $45.10.  The oil price drop may be a tad overdone. The revision is a mere 100,000 barrels, which isn’t even a rounding error when you consider that the Global daily oil production total is over 80 million barrels per day.

Still, USDCAD traders didn’t care.  The drop in oil prices was all the excuse they needed to buy US dollars.

FX markets are fickle. Yesterday afternoon, US dollar buyers were in short supply after Fed Governor Lael Brainard provided solid arguments as to why the Fed should not raise interest rates.  Her remarks sent the US dollar tumbling, oil prices rising and equity markets climbing.  That theme carried over into Asia, at least initially.   China data surpassed expectations.  August Retail Sales were up 10.8% (forecast 10.3%) and Industrial production rose 6.3% (forecast 6.1) Normally upbeat China data leads to AUDUSD and NZDUSD demand. Not this time.   Both currency pairs weakened. Elsewhere, USDJPY bottomed out in Asia and rallied, in part due to diminished safe-haven demand.

In Europe, EURUSD hugged a narrow 1.1217-1.1240 trading range and ignored weaker than expected ZEW survey results for the Eurozone and Germany.  Sterling was in the spotlight.  GBPUSD dropped from 1.3338 to 1.3253 on a weaker than expected inflation report. (UK August CPI Actual 0.3% vs. forecast 0.4%, m/m) PPI data was also soft and Retail Sales were as expected.

There isn’t any Canadian data due today and the US data is very low tier.  That means that USDCAD direction will continue to be governed by equity market and oil price movements as well as general US dollar sentiment.

USDCAD technical outlook.

The intraday USDCAD technicals are bullish while trading above 1.3040 which guards another uptrend line at 1.2970. While trading above those levels, USDCAD will continue to probe resistance in the 1.3150 area which also represents the downtrend line from the break of support in the 1.3650-60 area last February.  A break above 1.3150 should lead to 1.3250.  For today, USDCAD support is at 1.3070, 1.3010 and 1.2970.  Resistance is at 1.3120 and 1.3150.

Today’s Range 1.3070-1.3150