The overnight session was the type of market where FX traders just didn’t want to get involved.They did.  But not with a lot of conviction. The tiny US dollar gains against the majors ( except for the Antipodean currencies) seen at the start of New York trading, evaporated shortly afterwards.

FX markets are counting down the hours to the release of the FOMC policy statement, economic projections and Fed Chair Powell’s press conference.  As usual, those festivities begin at 2:00 pm EDT.

The probability of a 0.25% rate hike is 96.3% according to the CME FedWatch tool, so a hike is a non-event. The excitement will come from the tone of the statement and changes (if any) in the Statement of Projections.  Many analysts believe the dot-plot forecast will tack on one more hike in 2018

The outlook for higher US interest rates has underpinned the US dollar.  The latest Trump tirade threatening import duties on car imports along with complains about Canadian dairy and agricultural supply management practices may force the Bank of Canada to leave rates unchanged in July.

USDCAD inched higher throughout the overnight session, rising from 1.3013 to 1.3044 before drifting back to 1.3020 in early Toronto trading.

In Europe, weaker than forecast UK inflation data knocked GBPUSD down to 1.3307 from 1.3360.  May  CPI rose 2.4%, below the 2.5% expected but unchanged from April.  Other UK economic reports including PPI, Retail Price Index and DCLG House Price Index were mixed.  GBPUSD bounced off the low in early New York trading and currently sits at 1.3330.

EURUSD shrugged off weaker than expected  April Industrial Production data (-0.9%, m/m vs forecast -0.5%) and bought EURUSD after a 0.4% rise in employment (forecast ).3%). The move from 1.1744 to 1.1768 stalled and prices have slipped in New York trading.

USDJPY tracked higher ahead of the FOMC report but ran out of gas at 110.70.  Prices have retreated to 110.55 in New York.

The Antipodean currencies were the only currencies to eke out gains.  AUDUSD got a boost from a 0.3% rise in Consumer Confidence.  However dovish remarks from the RBA Governor Philip Lowe capped the gains. NZDUSD climbed from 0.6997 to 0.7033 by the time New York opened.

US PPI data will provide a minor distraction until the afternoon FOMC meeting. There aren’t any Canadian data.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are trading above 1.2990 looking for a break of resistance in the 1.3045-65 area to extend gains to 1.3125.  Longer term, the uptrend from the middle of april is intact while prices are above  1.2900.  For today, USDCAD support is at 1.3010, 1.2990 and 1.2970.  Resistance is at 1.3045, 1.3065 and 1.3110.

Today’s Range 1.3010-1.3090