So when will 1.20 print on USDCAD?

We have a quiet week ahead in terms of economic releases and this lack of data will probably see the trend for a stronger USDCAD continue. Keep an eye on oil though as a bounce here will give a bid to CAD but for the moment weak oil, weak commodities and weak employment numbers all combine to keep the Loonie on the back foot. Elsewhere, the Euro is having an even harder time of it with some commentators now calling for EURUSD hitting parity this year from the current 1.1850 level, and which 6 months ago was trading at 1.37. With Europe beset by political and fiscal issues it’s hard to see what can turn this one around and that 1 to 1 value seems a lot more likely than a return to the level of last summer.

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The USD hit a 5yr high against the floundering Loonie as divergent sets of economic data released this morning showed economies moving in different directions. The US added a better than expected 252,000 jobs in December, whereas Statistics Canada showed a 4300 decline last month when expectations were for a 15000 gain. Additionally US unemployment fell to 5.6% from 5.8% whilst the figure for Canada held steady at 6.6%.
Longer term the USD looks the currency to hold but given it’s the end of the week and we’ve seen a 2+% move so far this year don’t be surprised to see some profit taking and a pull back.

After tagging a new 6-year low under 47.00 earlier, WTI has bounce back to the mid-48.00s as of writing. This brief recovery is spilling over into oil-dependent currencies like the Norwegian krone and Canadian dollar. My colleague Kathleen Brooks already discussed the NOK in detail earlier today, but USD/CAD is also at a very interesting crossroads.’

After consolidating within a tight pennant formation around 1.16 over the slow holiday trading period, USDCAD aggressively broke out to a new 5.5-year high on the first trading day of 2015. The pair has since surged all the way to the top of its bullish channel in the mid-1.18s, helped along by strong bullish momentum as shown by the MACD indicator (below).

While the medium-term trend remains constructive (indeed, this is one of our favorite bullish charts over the next few months), there is scope for a possible pullback over the short term. If oil prices manage to stablize in the coming days (and we admit, it’s a big “if”), USD/CAD may dip from its overbought extreme back to the middle or bottom of the established channel. On the other hand, if oil continues to collapse at a mind-boggling pace, USD/CAD could accelerate out of its channel and surge to 1.20 or higher. Either way, the price action over the next 24 to 48 hours could set the tone for the next week or two.

USDCAD Overnight Range 1.1818-1.1864

FX markets were fairly choppy in Asia and then simmered down during the European session. However, weaker than expected Eurozone inflation data placed renewed pressure on EURUSD. The oil slide slid to a halt and WTI is up modestly ($48.24) and Brent is still above the psychologically important $50.00/bbl level.

This morning’s stronger-than-expected ADP employment report (Actual 241k vs. 225K expected) provided further support to the US dollar on hopes that Friday’s NFP report would surprise to the upside.

USDCAD suffered a one-two blow on the back of the stronger ADP data and a soft Merchandise Trade report.

USDCAD technical Outlook

The 2015 uptrend is intact while trading above 1.1810 with a break of the intraday high at 1.1865 suggesting further gains to 1.1930 and then 1.2000.  A move below 1.1810 will see a retest of support at 1.1760 and maybe 1.1720

Range for the day 1.1810-1.1910