A slightly weaker than forecast Canadian inflation report this morning, erased most of the gains from yesterday’s robust retail sales data. May CPI rose 1.3%, year over year, just below the 1.5% that was forecast. Low oil prices get part of the blame for the low reading.
USDCAD rallied on the news, rising from 1.323 to 1.3295. It should be noted that the price is still below the 1.3310 where it was yesterday, prior to the Retail Sales release.
US Markit PMI and New Home sales data is still to come which could offer a bit of support to the greenback if it exceeds the forecasts. If the data doesn’t help, there is still a chance that one of the three Fed speakers (Bullard, Mester or Powell) could say something to boost the US rate hike outlook.
Overnight, FX activity was quiet and the dollar opened in New York a tad weaker compared to Thursday’s close.
The Eurozone saw a slew of Markit PMI reports. Germany posted a gain in Manufacturing PMI (Actual 59.3 vs. forecast 59.0) but it was offset by below forecast Services PMI (Actual 53.7 vs. forecast 55.5) and Composite PMI. (Actual 56.1-vs. 57.3)
Eurozone PMI report was similar. A gain in Manufacturing PMI (Actual 57.3) was offset by misses in Services and composite data. Still, the data was mostly EURUSD positive. However, the spike from 1.1160 to 1.1185 was brief and reversed quickly. It is now in the middle of that range.
Sterling edged higher in Asia and Europe. Soon to be ex-PM May offered to protect the rights of EU citizens living in the UK which some see as evidence that Brexit negotiations will not be too acrimonious. At this stage, that is merely wishful thing. GBPUSD rose from 1.2677 to 1.2742 but eased down to 1.2720 in New York.
In Asia, USDJPY hugged a narrow 111.17-111.42 range and opened in New York, unchanged from the close.
AUDUSD and NZDUSD inched higher, supported by a bit of a bounce in oil prices. NZDUSD is still receiving help from RBNZ’s non-doveish stance. Nevertheless, NZDUSD is still lower than it was on Monday in Asia. AUDUSD is well below Monday’s level as well.
Oil prices were steady and well above yesterday’s low. The intraday technicals warn of further downside while prices are below $43.40/b
USDCAD Technical outlook:
The intraday USDCAD technicals are mildly bearish below 1.3320, inside the 1.3165-1.3350 consolidation range. The downtrend line from May 5 stays intact while prices are under 1.3430. For today, a break of 1.3210 will lead back to 1.3165. If 1.3165 is broken, it will hang a target on 1.3010 and then 1.2965. A break above 1.3320 would lead to a test of 1.3420.
Today’s Range 1.3230-1.3330
Chart: USDCAD 2 hour