The US dollar popped following when US economic reports were released.  Retail Sales were unchanged in December.  The inflation data triggered the move.   CPI rose 0.1% (forecast 0.2%, y/y) while Core CPI rose 0.3% (forecast 0.2%, m/m).  The rise in core CPI lifted the greenback across the board.  USDJPY rallied to 111.54 from 111.10.  The drop in EURUSD and GBPUSD was marginal due to the earlier German news.

News that Angela Merkel’s Christian Democratic Union party and the Social Democrat party are close to forming a new German government, awakened a sleepy FX market.

EURUSD drifted aimlessly in a 1.2030-1.2068 range throughout the Asia session until early in Europe.  The German political news launched EURUSD through resistance at 1.2080 to 1.2135.  Simultaneously, the USDX broke key support at 91.50, which signals additional US dollar weakness ahead.

Sterling rallied with EURUSD.  GBPUSD climbed from 1.3536 to 1.3621 after a sleepy Asia market.

AUDUSD and NZDUSD traded sideways then drifted lower on profit-taking ahead of today’s US data.  The move lower came despite China’s trade surplus widening.

USDJPY continued to undermined by last Tuesday’s BoJ announcement of a reduction in long and super long bond purchases.  Board US dollar weakness added to the downward pressure.  USDJPY dropped from 111.42 to 111.01.

Profit-taking also weighed on oil prices.  WTI drifted down from $63.69 to $63.20.  Gold prices rose  $11.29, rising from $1,321.88 to $1,332.97 due to broad US dollar weakness.

USDCAD bounced inside a 1.2510-30 range in early New York trading but spiked to 1.2554 after the US data.  NAFTA concerns continue to underpin the currency while a BoC rate hike next week caps the top.

USDCAD Technical outlook:

The intraday USDCAD technicals are bearish after failing to extend gains beyond 1.2590 yesterday.  A move below the 1.2495-1.2510 support area will lead to 1.2470 and then 1.2410.  A break above 1.2560 will put 1.2620 in play.

Today’s Range 1.2490-1.2590