USDCAD Overnight Range 1.2904-1.2961

The USD dollar sentiment has shifted to bullish following Friday’s blow-out Retail Sales data and gently rising expectations for a June/July rate increase.

Asia markets started off concerned with weaker-than-expected China data as Retail Sales and Industrial Production missed forecasts.

The concern faded as traders focused on the prospects for higher oil prices.  Goldman Sach’s, proclaimed that “The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected”, adding “The market likely shifted into deficit in May…driven by both sustained strong demand as well as sharply declining production.”  WTI rallied from $46.19/b to $47.23/b

The US dollar bullish bias is likely to remain intact today, ahead of tomorrow’s CPI data. A higher than forecast reading would fuel support for a June rate hike while weaker data would argue for a further delay.

The bulls and bears are in a tug of war in USDCAD.  The bulls expect the mix of strong US data and rate hike fever to boost USDCAD while the bears are looking to higher oil prices to counteract any strength and keep the downtrend alive. The key Canadian data (Retail Sales and CPI) isn’t due to Friday. Speculative long CAD/short USD positions on the IMM as reported by the Commitment of Traders report shows the Canadian dollar as the only currency where positions were not reduced and in fact increased. If they head for the exits at the same time, the USDCAD rally could be nasty.

USDCAD technical outlook

The intraday USDCAD technicals are bearish with this morning’s break of the minor uptrend at 1.2915 which should extend losses to 1.2870.  A move below 1.2870 would lead to a test of 1.2830 and then 1.2750.  Longer term, the USDCAD downtrend from the January, 1.4150 area remains intact while prices are below 1.3020.

For today, USDCAD support is at 1.2870, and 1.2830. Resistance is at 1.2960. 1.2990 and 1.3020. Today’s Range 1.2860-1.2960

Chart: USDCAD daily