Weak US data sent the greenback tumbling this morning.  May CPI (Actual -0.1% vs. forecast 0.0% and April 0.2%, m/m) and May Retail Sales (Actual -0.3% vs. forecast 0.1% and April 0.4%, m/m) were well below forecasts, setting the stage for a doveish FOMC rate hike, policy statement and press conference.

EURUSD exploded through the top of its two day 1.1185-1.12130 range and printed 1.1259. USDJPY snapped an overnight rally and plunged from 110.30 to 109.57.  Even Sterling got into the act.  GBPUSD rallied from 1.2723 to 1.2775.

AUDUSD and NZDUSD extend their overnight gains on the back of China data and this morning’s soft US reports.

USDCAD extended losses and punched below support at 1.3190 and touched 1.3167, supported the weak US data, the Bank of Canada interest rate policy shift, and the narrowing CAD/US interest rate spreads.

The commodity currency bloc (AUD, NZD, and CAD) were the only currencies to gain against the US dollar, overnight.  Those gains were partially fueled by “mixed” to “better-than-expected” China economic data.

China May Retail Sales rose 10.7%, y/y unchanged from April but a tick better than the forecast. Industrial Production rose 6.5%, y/y beating the forecast but unchanged from April.

AUDUSD rallied from 0.7533 to 0.7586 by the New York open.  NZDUSD climbed from 0.7201 to 0.7259 in the same period.

Oil prices erased all of yesterday’s gains when API reported that US crude inventories rose in the past week. WTI dropped from $46.47/b to an overnight low of $45.70. However, broad US dollar weakness after this morning’s US data boosted WTI to $46.20/b

The Paris based International Energy Agency (IEA) warned that global production in 2018 will exceed global demand which should put a cap on gains in the short term.

This afternoon, the FOMC is expected to upgrade their 2017 GDP growth forecast but the uncertainty surrounding the Trump administration and its apparent dysfunction will ensure that the dot-plot forecasts remain unchanged.

USDCAD Technical outlook:

The USDCAD technical’s are bearish, having crushed support from the uptrend line from February, the 100 and 200 day moving averages and the breach of 1.3280 (61.8% Fibonacci retracement of February-May range.  A decisive break below 1.3210 opens the door to the 2017 low of 1.2698.

The intraday technicals are bearish while prices are below 1.3220 that is looking for a break of 1.3190 to extend losses to 1.3110.  A break above 1.3220 would lead back to 1.3260 and then 1.3290.  The 200-day moving average at 1.3330 should contain upside moves.  For today, USDCAD support is at 1.3190, 1.3160 and 1.3110.  Resistance is at 1.3230, 1.3260 and 1.3290

Today’s Range 1.3140-1.3230

Chart: USDCAD daily