Bank of Canada Governor Stephen Poloz reiterated his “rate cuts have done their work” line in an interview with CNBC in Sintra, Portugal. In Europe, it appears to have been seen as “fresh insight” and USDCAD got crushed.

It didn’t start that way.  Tuesday’s end of day API Crude Stocks change report showed a small gain in inventories.  USDCAD rallied from 1.3150 to 1.3195, but that move was short lived. USDCAD resumed its trek southward, opened in New York at 1.3137 and then dropped rapidly until finding a temporary low of 1.3076.

	27-Jun	28-Jun
	Close	Open	High	Low
USDCAD	1.3166	1.3137	1.3195	1.3131
EURUSD	1.1344	1.1361	1.1387	1.1330
USDJPY	112.22	112.19	112.40	111.84
GBPUSD	1.2827	1.2816	1.2832	1.2795
USDCHF	0.9598	0.9605	0.9608	0.9585
AUDUSD	0.7598	0.7594	0.7615	0.7582
NZDUSD	0.7276	0.7257	0.7296	0.7256
USDMXN	17.9760	17.9938	18.0764	17.9530
WTI	44.22	44.11	44.21	43.74

The freshly minted hawkish sounding Bank of Canada caught many traders the wrong way.  The mix of stable oil prices, 40 percent odds for a July rate increase and bearish technicals is a recipe for additional USDCAD weakness.  A better than expected EIA Crude report this morning could be the catalyst.

The Canadian dollar was a major story overnight, but not the only one.  EURUSD made a one year high when it touched 1.1387. A sudden drop just after breakfast drove the single currency down to 1.1292 due to a discussion as to whether or not Mario Draghi’s remarks, yesterday, were misinterpreted.

Sterling stays sidelined.  GBPUSD traded inside a 1.2794-1.2853 range, torn between a soft US dollar, the UK interest rate outlook and ongoing Brexit issues.

In Asia, traders keyed in on the US Healthcare vote delay and ECB President Draghi’s Tuesday remarks. Trouble passing the Healthcare legislation implies that Trump’s tax cut plan is in jeopardy as well., removing fiscal stimulus from the US dollar value equation. The antipodeans spent the overnight session bouncing within narrow ranges and starting today with small losses.

USDJPY was whippy inside a 111.84-112.40 range and despite all the chop, opened in New York unchanged from the close.  The US healthcare delay, equity prices and profit taking all had a role in trading at various times.

Oil shrugged of the disappointment from the API report and recovered all the losses.  WTI Rallied from a low of $43.74, touched $44.21 and eased back to $44.11 at the New York open.  Traders are waiting for this morning’s EIA report.

There is no shortage of Central bank speak today thanks to the European Central Bank forum in Sintra, Portugal that has Draghi, Poloz, Kuroda and Carney on a panel.  Mr. Draghi is unlikely to offer anything different from yesterday. Mr. Poloz will likely stick to the script from his CNBC interview.

USDCAD Technical outlook:

USDCAD technicals are bearish and vulnerable to a “wash-out” of stretched short CAD/long US dollar positions, as reported by the Commitment of Traders report. Yesterday’s break below support in the 1.3180-1.3205 area has hung a target on 1.2970, the February 2017 low.  1.2970 is also the 61.8% Fibonacci retracement of the May 2016-May 2017 range.  If broken it targets 1.2770.  For today, USDCAD support is at 1.3070 and 1.3040.  Resistance is at 1.3130 and 1.3180

Today’s Range 1.3060-1.3130

Chart: USDCAD weekly