USD CAD OPEN (6:00 am EDT) 1.3301-04 Overnight Range 1.3281-1.3302

US inflation data came in below estimates and the US dollar slid.  Headline May CPI rose 1.8% compared to 2.0% in April and a tick below the consensus forecast of 1.9%. Core e CPI missed the forecast as well rising 2.0% y/y rather than the expected 2.1%

It was good news for the Canadian dollar.  USDCAD had climbed from an overnight low of 1.3281 to 1.3202 when New York opened and was hovering close to that level ahead of the data.  Prices slipped to 1.3285 immediately afterwards, but more importantly it alleviated some of the topside pressure.

The CPI data didn’t do anything for oil prices.  WTI started sliding yesterday morning and accelerated lower in early Asia trading.  WTI traders started getting bent out of shape (again) on Tuesday, concerned about weakening economic growth and lower demand expectations. News that the American Petroleum Institute (API) said US crude inventories rose 4.9 million barrels in the week ending June 7 exacerbated selling pressure overnight, and prices continued to drop.  WTI peaked at $54.02/barrel yesterday and hit $51.42/b in early Asia markets, for a loss of 4.8%.  Traders were unimpressed with reports that Iran would ask Japanese Prime Minister Abe to mediate oil sanction talks.

USDCAD rallied in the face of falling oil prices, but the currency pair got an assist from US dollar demand against the commodity bloc currencies as well.  Nevertheless, the break below key support at 1.3340, 1.3320 and 1.3270 argue that today’s bounce is just a correction.  Longer term, USDCAD downside may be limited by speculation the Bank of Canada could cut interest rates as soon as October.

EURUSD and GBPUSD popped back close to their overnight peaks while AUDUSD and NZDUSD rallied as well.  The weak inflation renewed downside pressure on USDJPY as it supports the case for Fed rate cuts.

GBPUSD is the star performing currency today. Prices have climbed steadily since yesterday following the modestly better than expected wage data in the employment report with comments by Bank of England Monetary Chief Economist Michael Saunders warning of rates hikes “sooner than expected.  GBPUSD climbed from 1.2672 yesterday to 1.2756 in early New York trading today.  Comments from UK Prime Minister “wannabe” Boris Johnson saying he “not aiming for a no-deal outcome” on Brexit triggered the push from 1.2739 at the New York open to 1.2756 but the qualifier that leaving “no” on the table “was a vital negotiation tool” capped the gains.

In Asia, USDJPY chopped around in a 108.22-108.55 range.  Traders were torn between selling the currency pair on soft US Treasury yields and buying it on US rate cut concerns.

China CPI and PPI data didn’t offer any surprises, leaving AUD USD and NZDUSD to edge lower on weaker commodity Prices.  Massive protests in Hong Kong raised the anxiety level and undermined Asia equity indices.

USDCAD Technical Outlook

The intraday USDCAD technicals are modestly bullish and in a minor uptrend while prices are above 1.3260, looking for a break above 1.3310 to extend gains to 1.3350.  Failure to break above the 1.3310 area today, should lead to a retest of 1.3220. For today, USDCAD support is at 1.3260 and 1.3220.  Resistance is at 1.3310 and 1.3350. Today’s Range 1.3260-1.3330

Chart USDCAD hourly