It’s Valentines Day, but no one is buying the Loonie chocolates and flowers.  Instead, they are plucking its feathers despite a rash of good news for riskier assets.  The US may extend the March 1 deadline for raising tariffs on China by 60 days. The threat of another US government shutdown has greatly diminished, and it probably won’t happen.  Oil prices surged again. AUDUSD and NZDUSD rallied despite recent dovish retreats by their respective central banks.  And the Loonie continues to drift lower.

One of the reasons for the Loonie’s lacklustre performance for the past few days is that USDCAD is tracking EURUSD moves and EURUSD traded lower. USDCAD technicals turned bullish after support at the 200 day moving average held and the subsequent rally took out resistance at 1.3220.

One of the reasons that Bank of Canada governor Stephen Poloz adopted a dovish stance on January 9 was because of fears that falling oil prices would hurt domestic growth and Federal government revenues.  WTI oil prices have rallied 9% since then. More recently, WTI oil prices climbed 5.3% since February 11.

Arguably, the USDCAD/ WTI oil relationship is overdue to reassert itself, and if oil prices remain elevated or go higher, USDCAD should retreat. Canada added an impressive 66,800 jobs in January. Average hourly wages increased, and Building Permits rose.  USDCAD remained soft despite the signs that the domestic economy is far from dead.

This morning’s Canadian December Manufacturing Shipments data is expected to rise 0.2%, while Housing Price Index will stay unchanged at 0.0%  Better than expected data combined with weaker than expected US data could send USDCAD lower.

Elsewhere, the antipodean currencies hung on to gains made because of the improved risk tone but European currencies were mostly unchanged at this mornings open.  USDJPY got an added lift from higher US Treasury yields.

EURUSD traded in a narrow, 0.0020-point range.  Eurozone Q4 preliminary GDP was 0.2% q/q, as expected.  GBPUSD dropped from 1.2875 to 1.2814 ahead of another US parliament vote on Brexit.

The government shutdown may taint this morning’s US Retail Sales and PPI data

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are above 1.3210, looking for a break of resistance at 1.3280 to extend gains to 1.3330. which is guarding key resistance at 1.3380 A break below 1.3210 targets 1.3180. For today, USDCAD support is at 1.3230 and 1.3210.  Resistance is at 1.3280 and 1.3330.  Today’s Range 1.3210-1.3280 fff