USDCAD drifting higher into resistance at 1.2870s. US CPI next up. 500mln+ option expiry at 10am.
  • USDCAD: Dollar/CAD traders had an uneventful day yesterday as EURUSD recovered earlier losses and wandered for the rest of the day. Trudeau spoke later in the session on CNBC on the topic of tariffs and NAFTA but he didnt say anything shocking or market moving. Today we finally get some data with the US CPI figures at 8:30amET. Markets are expecting +2.2% YoY, +0.2% MoM and +1.8% on core (ex Food and Energy). USDCAD has drifted higher overnight and is now testing overhead resistance, which converges today in the 1.2870s. This will be the key level to watch today in our opinion. A close above will give the market reason to rally back in the low 1.29s, whereas a close below would invite a retest of the low 1.28s. Cross flows are supportive at this hour. Theres a decent sized option expiry for USDCAD today at 1.2850 ($500mln+) which could keep the market a little heavy before 10amET. In the absence of Canadian specific headlines, we think USDCAD will likely trade again off the broader USD reaction to the US CPI figures. Canadian dollar futures traders added 3352 contracts in positions yesterday. The Bank of Canadas Stephen Poloz will be speaking in Kingston at 10:30amET, but the topic matter is not expected to be monetary policy related.

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Erik Bregar - Director, FX Trading
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