China diplomacy was on full display overnight. China’s Dalian port banned imports of Australian coal and will cap 2019 imports at 14 million tons while other major ports are taking over 40 days to clear coal shipments from down under.  The move may be China’s response to Australia’s complaints about cyber-security concerns and because Australia revoked a prominent Chinese business man’s visa.  If true, it wouldn’t be much of a stretch to suggest that Canada may be in for similar treatment because of the arrest of the Huawei CFO.

AUDUSD was knocked to the canvas on the news which came after prices rallied following a robust employment report.  Australia added 39,100 full-time jobs in January, beating the forecast for a gain of 15,000.  AUDUSD popped from 0.7162 to 0.7205 on the news and then plunged to 0.7087 after the coal ban news. A report that Westpac Banking Corporation predicted that the RBA would be forced to cut interest rates because of slowing growth and low inflation exacerbated the move lower.  NZDUSD tracked AUDUSD lower, undermined by the FOMC minutes suggesting a Fed rate hike was still possible.

The FOMC minutes were as expected.  The Fed is going to be patient, and there is still a risk for a rate hike in 2019, as “several participants” argued that rate increases might be necessary if inflation was higher than the base outlook. 

Wall Street liked the news and closed with small gains. US equity futures point to a positive opening today, supported by a Reuters report that the US and China trade negotiators are sketching out a deal outline.

EURUSD is trading in the middle of its 1.1321-1.1362 range.  Traders shrugged off the worse than forecast Eurozone and Manufacturing PMI  data. (EZ Actual; 49.2 vs forecast 50.3, German (Actual 47.6 vs forecast 49.7)

GBPUSD is at the bottom of it’s 1.3328-86 overnight range.  MP defections from the Conservative party have undermined the currency while hopes that PM May and European Commission President Juncker can make May’s Brexit plan more palatable to MP’s supports the currency.

USDCAD is consolidating yesterday’s gains, with prices undermined by rising WTI oil prices. WTI climbed to $57.58 in early New York trading, supported by yesterday’s end of day API crude oil report which showed US inventories rose 1.26 million barrels last week.  Opec production cuts and progress on the US/China trade talks contributed to the gains.

There is plenty of US economic data this morning.  Durable Goods Orders (forecast 1.7%), Jobless Claims, Philadelphia Fed Manufacturing Survey, and Existing Home Sales will give markets plenty to digest.  The Fed said they were data-dependent so better than expected data would support the US dollar because of renewed rate hike risks.  The Canadian data consists of Wholesale Sales for December.

USDCAD Technical Outlook

The intrraday USDCAD technicals are bearish while prices are below 1.3205, looking for a break of the 1.3150-80 support area to extend losses to the long term uptrend line at 1.3110. A move below this level opens the door for a drop to 1.3005, with 1.2798 lurking in the wings.    For today, USDCAD support is at 1.3150 and 1.3120.  Resistance is at 1.3205 and 1.3230.  Today’s Range 1.3120-1.3205 an style