The US dollar closed with hefty gains yesterday and managed to hang on to those gains in a somewhat subdued overnight session.  The British pound and Canadian dollar were the worst performing currency pair yesterday.Yesterday’s US/China trade pessimism flipped to optimism after news that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin talked trade with senior Chinese officials.  Wall Street closing in positive territory after spending most of Monday in the red, gave a better tone to Asia markets, which closed on a mixed note.


AUDUSD and NZDUSD rose on news of the trade talks.  Data from both countries was as expected.  USDJPY drifted lower inside a 113.02-113.31 range.  Prices were underpinned by the tick higher in US Treasury yields.


Sterling hogged centre stage yesterday and overnight.  UK Prime Minister Theresa May’s decision to cancel the vote on her Brexit plan drove GBPUSD from 1.2750 at yesterday’s European open to 1.2510 just before lunch.  Prices inched higher throughout yesterday afternoon and today supported by a better-than-forecast UK employment report.   GBPUSD peaked at 1.2637 in Europe before slipping back to 1.2618 in early New York trading.


EURUSD slipped with GBPUSD’s plunge, but its losses were limited.  Prices were modestly supported by better than expected ZEW survey data from Germany and the Eurozone. Societe Generale economist Kit Juckes suggests French President Macron’s decision to raise the minimum wage and delay the fuel tax could be beneficial for Italy and its budget negotiation with the EU.


Oil prices have been volatile.  WTI gave back all of its post-Opec gains yesterday, in part because of the falling dollar but also because global slowdown concerns suggested the cuts weren’t deep enough.  WTI touched $50.73/barrel overnight before recovering to $51.40/b at the New York open.


Loonie traders forgot all about Friday’s blockbuster employment report yesterday and bought  USDCAD which rose from 1.3314 at the open to 1.3420 overnight. Prices are supported by the Bank of Canada’s dovish flip-flop, low oil prices and their impact on Canada’s growth outlook and fears that Canada landed in the middle of the US/China trade war, thanks to the arrest of the Huawei CFO.  The rally also confirmed the bullish USDCAD technical picture.

This morning’s US data includes Producer Prices, but markets will continue to take direction from Wall Street moves and US/China trade developments.  There aren’t any Canadian data reports on tap

The  USDCAD technicals are bullish.  Last week’s minor downtrend from the 1.3440 peak was broken with the move above 1.3340 yesterday.  A decisive move above the 1.3440-60 resistance area targets 1.3540.  Longer term, the break above 1.3390 (76.4% Fibonacci retracement of 2017 range: 1.2087-1.3787) suggests a 100% retracement is possible.  For today, USDCAD support is at 1.3380 and 1.3340.  Resistance is at 1.3420, 1.3440 and 1.3460.  Today’s Range: 1.3370-1.3440