Canada’s Merchandise Trade deficit narrowed sharply, and the Canadian dollar rallied  The April deficit was $1.9 billion, down from the $3.93 billion deficit in March. USDCAD dropped from 1.2893 to 1.2856 on the news.  The USDCAD sell-off got legs, overnight.  On Tuesday, a rumour that President Trump would announce he was quitting Nafta in favour of bilateral negotiations sent USDCAD soaring to 1.3065. Pushback from Canada and Mexico plus profit-taking drove USDCAD to 1.2976 at the close.  Prices spiked lower in thin Asia markets after US Treasury Secretary Mnuchin asked Trump to exempt Canada from sanctions.

Seventy-four years ago today, Allied forces crossed the English Channel, storming onto French beaches under withering fire from entrenched German forces. Private Ryan had yet to be saved. Today, American trading partners are under a tariff bombardment from the White House.  Nafta is in need of saving.

FX markets were lively, overnight.  In Asia, Australia Q1 GDP grew 3.1%, y/y (forecast 2.8%) and lifted AUDUSD to 0.7671 from 0.7617.  NZDUSD shrugged off a weak Globa lDairy Trade auction result and climbed with Aussie, but in a narrower 0.7024-58 range.

USDJPY broke through resistance at 110.00 and reached 110.18 where it was at the New York open.  Prices were supported by higher 10-year Treasury yields which rose from 2.902 yesterday to 2.952 in early New York trading.

EURUSD closed yesterday on a firm note and continued to climb in Europe.  EURUSD rose from 1.1714 to 1.1770, where is trading in New York.  Yesterday’s reports that the ECB would discuss an end to QE were confirmed by ECB Chief Economist Peter Praet, this morning.  Mr Praet said “Next week, the Governing Council will have to assess whether progress so far has been sufficient to warrant a gradual unwinding of our net purchases,”

The broad US dollar weakness and the lingering positive sentiment from Tuesday’s Services PMI report lifted GBPUSD from 1.3393 to 1.3436

Trade rumors and EURUSD developments will determine USDCAD direction.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish while prices are below 1.2950 looking for a break of support at 1.2850 to extend losses to 1.2760. .Longer term, the downtrend from March remains intact while prices are below 1.3030.  For today, USDCAD support is at 1.2850. and 1.2810.  Resistance is at 1.2910 and 1.2940.

Today’s Range 1.2850-1.2950