USDCAD is on a tear. The break of resistance in the 1.3470 area threatens a retest of the 2017 peak of 1.3596 and you can thank a steep plunge in oil prices for a large part of the move. USDCAD was already in an uptrend thanks to the Bank of Canada’s focus on the economic negatives in their March 1 policy statement.  That was occurring as IMM speculative long CAD positions were building, It got worse with the rise in US Treasury yields and strong American data essentially guaranteeing a March 15 rate increase.

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Open

  
 8-Mar  9-Mar

High

Low
USDCAD 1.3494 1.3526 1.3522 1.3485
EURUSD 1.0543 1.0557 1.0568 1.0526
USDJPY 114.34 114.71 114.92 114.37
GBPUSD 1.2168 1.2151 1.2175 1.2141
USDCHF 1.0147 1.0144 1.0159 1.0142
AUDUSD 0.7532 0.7497 0.7532 0.7495
NZDUSD 0.6912 0.6899 0.6915 0.6892
USDMXN 19.6570 19.5890 19.7809 19.6646
WTI   50.31 52.73 50.81 49.22

However, stable oil prices above $52.00/barrel and positive upward sentiment looked like it would cap USDCAD gains.  That changed when it appeared that oil speculators capitulated following another EIA report of a massive increase in US crude inventories. WTI dropped like a stone through support at $52.50 and again at $50.00 opening the floodgates to further losses.

The shift to bullish USDCAD technicals, CAD/US interest rate policy divergence and a collapse in oil prices has opened the door to further USDCAD gains.

In Europe, the ECB left interest rate unchanged which was expected. The surprise came when Mario Draghi said that there was no longer any urgency on stimulus.  He said that “Sentiment indicators suggest that the cyclical recovery may be gaining momentum.”  EURUSD rallied from 1.0541 to 1.0606.

The US dollar sell-off against EUR spread to GBPUSD which jumped to 1.2192 from 1.2152.  USDJPY rallied likely as a result of demand for EURJPY.

It was a different story in Asia.  USDJPY trading was uneventful  although it maintained a bullish bias. European traders looked at rising US yields and the prospect of a hawkish FED statement next week and drove USDJPY from 114.38 to 114.97.  Those gains were not sustained and the currency pair dropped back to 114.55 at the New York open.

AUDUSD and NZDUSD declined in Asia but rebounded in Europe.  Those gains were extended after the ECB press conference.

The US employment data is due tomorrow.  Forecast are for a gain of 190,000 jobs with Wednesday’s ADP data suggesting that the forecast may be low.

USDCAD Technical outlook:

The USDCAD technicals are bullish while prices are above 1.3445 and looking for a break of resistance in the 1.3560-1.3600 area to extend gains to 1.3840 representing the 61.8% retracement level of the 2016 range.  A move below 1.3440 would extend losses to 1.3370.   For today, USDCAD support is at 1.3480 and 1.3440.  Resistance is at 1.3540 and 1.3560.

Today’s Range 1.3480-1.3560

Chart: USDCAD and WTI oil 1 hour

USDMXN technicals

USDMXN is in a minor intraday uptrend while prices are trading above 19.7030, which is currently being tested.  A move below that level will extend losses down to 19.6530 and then 19.50.  If it holds, a restest of 19.7900 is likely

Chart: USDMXN 30 minute