The Loonie was crushed after August Retail Sales  declined 0.3% after rising 0.4% in July. Statistics Canada reported sales were down in 8 of 11 subsectors, representing 57% of retail trade.   USDCAD soared, rising from 1.2478 to 1.2558.

On the good news front, the consumer Price Index rose 1.6% in September, up from the 1.4% gain in August.

USDCAD traders reacted like they expect  the Bank of Canada  to not only leave rates unchanged next Wednesday, but issue a doveish statement, downplaying the risks of a December rate increrase.

The US dollar got a big boost overnight when the US Senate passed a 2018 budget resolution 51.49, which is supposed to pave the way for President Trump’s tax cuts. It still needs to pass a House vote.  Nevertheless, traders bought US dollars.

USDJPY soared from 112.53 to 113.45 on US fiscal stimulus hopes and is trading close to the peak in New York. The move was supported by a rise in US Treasury yields and a fresh story predicting Jerome Powell as the next Fed Chair.

The US budget announcement didn’t do Kiwi any favours.  NZDUSD was already under-pressure due to the new Labour coalition government, and the budget news fueled selling.  NZDUSD dropped from  0.7035 to 0.6973  AUDUSD followed suit, erasing all of Thursday’s gains.

Thursday’s EURUSD rally was halted in its tracks by the budget news.  EURUSD sank to 1.1792 from a peak of 1.1857  Traders remained nervous ahead of next week’s ECB meeting and the Spain /Catalonia feud. Traders ignored news that the Eurozone trade surplus widened and German PPI rose.

GBPUSD was sold in Asia on the budget story, falling from 1.3158 to 1.3089 but recouped those losses in Europe and opened in New York at 1.3150.  A thaw in the frosty EU/UK Brexit negotiations may have encouraged the buying.   Bank of England Deputy Governor Jon Cunliffe appeared to downplay a November rate hike when he said he didn’t see signs of sustained inflation. He is the third BoE official to deliver doveish remarks which suggest a November rate hike is not a slam-dunk.

The prospect of US fiscal stimulus, and hawkish leaning Fed Chair and the prospect of higher interest rates knocked gold and oil for a loop.  WTI oil fell from $51.57/b to $50.72/b.  Gold prices dropped to $1,279.50 from $1,290.91/oz.  Both commodities are trading higher in New York

USDCAD Technical outlook:

The intraday technicals are bearish while prices are below 1.2520 looking for a break of support in the 1.2470-80 area to extend losses to 1.2440 and then 1.2410.   The short-term outlook is mixed while prices are between 1.2430 and 1.2605.  .Long-term, the weekly uptrend from September 2012 is intact while prices are above 1.2080.

Today’s Range 1.2490-1.2580

Chart: USDCAD daily