USDCAD   Overnight Range 1.2648-1.2755        

The headline says it all. Oil prices are leaking lower on a combination of rising supply and a rising US dollar. Canadian data isn’t helping matters either.  Today’s Merchandise trade report is far worse than expected (Deficit widened to -$3.3 billion) and exports declined 0.6% in May. Today’s data and last week’s soft GDP report will fuel calls for another Bank of Canada rate cut at the July 15th meeting. And if that wasn’t enough, the Canadian dollar is also being sold on the back of general US dollar strength stemming from the Greek debt crisis and the break of key support levels in EURUSD.  USDCAD extended yesterday’s gains in Europe and then accelerated in early New York trading, breaking above the overnight high of 1.2730 and touching 1.2760, so far today.

FX trading was extremely quiet in Asia although AUDUSD traders made a bit of noise around the RBA rate announcement. Rates were left unchanged with the usual nod to the need for AUD depreciation. European markets were livelier with trading driven by a spate of negative headlines on Greece. Emergency meetings by EU Finance Ministers will ensure a fresh supply of news throughout today.

USDCAD Technical Outlook

The intraday and short term technicals are bullish following the break of resistance at both 1.2640 and 1.2670.  The move above the 1.2720-30 area will extend gains to the 1.2820-50 zone and suggests that a short term bottom is in place at 1.2630. Above 1.2850 puts 1.3050 is play. A retreat below 1.2630 would lead to 1.2510 but keep the current uptrend from June intact.  For today, USDCAD support is at 1.2710, 1.2680, and 1.2640.  Resistance is at 1.2760 and 1.2780 and 1.28720

Today’s Range 1.2710-1.2810                                 Larger Chart

The economic outlook for Japan is not pretty. The country, once the poster child for technological advancement and export strength, has been struggling in both areas.

Take a look at some of the technical analysis below which paints this bleak picture.

Japan’s Exports Are Contracting

Japan is struggling to grow its exports.

….5 more charts, analysis & podcast HERE

Soft data and softer oil prices undermine Loonie

USDCAD   Canada Day Range 1.2490-1.2595  

Overnight Range 1.2565-1.2630

The Loonie got spanked while Canadians got tanked (some of them anyway) and the rest were singing O’ Canada.  A perfect storm combining weak GDP data, a resurgent US dollar on interest rate divergence and a steep drop in oil prices caused a stampeded to buy USDCAD.  The move was exacerbated by poor liquidity and the break of key resistance levels. Today’s US nonfarm payrolls report was widely expected to come out on the strong side of forecasts due to improvements in the employment components of other data. That didn’t happen and early (and overnight) US dollar gains were quickly erased. US NFP showed a gain of 223K vs forecasts of 233K and 0 for the average hourly earnings s component.  The sting of these misses was eased by the drop in the unemployment rate to 5.3% from 5.5% last month.  The US dollar is still jockeying for position following the data but once the intraday positioning gets cleaned up, the underlying bullish bias will reassert itself.

Yesterday and overnight, the Loonie wasn’t the only currency to get whacked. All the G-10 currencies suffered the same fate.  Soft data from Australia and rate cut fever in New Zealand drove the antipodeans lower. A report that three large Japanese pension funds were shifting their asset allocations to a more aggressive strategy, helped drive USDJPY higher.

The upcoming Greek referendum has pushed the EU/Greece story to the sidelines in FX trading, at least until late Sunday.

USDCAD technical outlook

The intraday and short term USDCAD technicals are bullish. The downtrend from the March peak of 1.2820 was snapped with yesterday’s break above resistance in the 1.2490-1.2505 area which was also the neckline of an inverse head and shoulders pattern. This break implies further gains to the 1.3300 area in the medium term.

The intraday USDCAD technicals are bullish while trading above 1.2580, looking for a break of 1.2630 (overnight high) to extend gains to 1.2880 and then 1.2940.  A move below 1.2570 would lead to a test of support at 1.2520.

Today’s Range 1.2560-1.2630

Chart: USDCAD daily with neckline break of inverted head and shoulders

Larger Chart

DXY gained 1.46% last week to close at 95.65 back above its 34-dma as well as its mid-June reaction high (a higher high) giving hope to the bulls that the final rally is upon us. Despite the bearish seasonality of July, cycles indicate that the Dollar is set for one “last hurrah” prior to a “summer swoon” a month from now.

Cycles target a turn near July 24 and are a good match for the cycle low in TNX (yield on the 10 year US Treasury note) expected then. A 40 week cycle low is expected in late Sept (similar to cycle high in TNX) but an annual cycle shows a low in Feb and is a better match with a 3yr cycle.

Short-term cycles this week are a bit difficult to read but a close below Thursday’s low at 95.26 will convince me that the trend, until closer to July 9, is still down.

A symmetrical triangle on the monthly chart measures a minimum move to 102.00 which is the 61.8% retracement of the 2002 bear market. 102.00 is also a 127.2% retracement of the Apr/May decline.

Larger Image

To take a “sneak-peek” at SeattleTA research click here.

Is this the only trade this week while Europe and Greece debt issues play out.

Long $USD

UPDATE: If the market prices in a GREXIT then that makes the Eurozone more healthy, so it seems, which is good for the Euro. DXY down, then EURO up. The week will be a wild one, it can change on a dime!

 Larger Image

Larger Image

Investing Quote…

..”Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader”…

Jesse Livermore

The minute you get away from the fundamentals – whether it’s proper technique, work ethic, or mental preparation – the bottom can fall out of your game.

Basketball Legend Michael Jordan.

..”Money couldn’t buy friends, but you got a better class of enemy”..

Spike Milligan

…“To me, the ‘tape’ is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!”…

Martin Zweig

..”A market is the combined behavior of thousands of people responding to information, misinformation and whim”..

Kenneth Chang

– See more at ReadTheTicker