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USD / CAD - Canadian Dollar Gives Back Gains

- Canada November GDP expected to be flat.

- IMF forecast downgrades growth forecast for 2023.

- US dollar gains overnight but will end January with losses across the board.

USDCAD snapshot open 1.3466-70, overnight range 1.3380-1.3468, close 1.3387, WTI $76.75, Gold $1905.13

The Canadian dollar peaked yesterday morning then fell steadily throughout the day and continued to do so overnight. A wave of negative sentiment washed over markets ahead of Wednesday’s FOMC meeting and drove Wall Street sharply lower and lifted the greenback on safe-haven demand.

USDCAD rallied from 1.3302 on Monday to 1.3470 just as NY opened today and triggered stop loss buying on the break above 1.3390. The overnight move flipped the short-term technical outlook from bearish to bullish and suggested further gains to the 1.3550 area.

The Canadian dollar was also weighed down by softer WTI oil price, which dropped from $78.11/b to $76.59/b. the decline was mainly due to position adjustment ahead of the FOMC meeting and by broad US dollar strength.

Canada GDP for November is expected to rise just 0.1% in November. The news is stale and should not cause much of a stir in USDCAD trading unless the results sharply deviate from the estimate.

EURUSD traded negatively in a 1.0803-1.0859 range with the bottom occurring in Europe, undermined by weaker retail sales in Germany. Prices rebounded after better-than-expected Eurozone growth. Q4 GDP rose 0.1% q/q (forecast -0.1% q/q) and 1.9% y/y (forecast 1.8%).

GBPUSD is at the bottom of its 1.2309-1.2370 overnight range. The IMF report predicting that the UK would be the only major G-10 economy to shrink in 2023 and broad US dollar demand ahead of the FOMC weighed on the currency. Analysts suggest that the recent Eurozone inflation readings will make the ECB more hawkish than the BoE and EURGTBP demand will be another negative for GBPUSD.

USDJPY traded in a 130.05-130.52 range and opened fairly close to the level it started the year. Traders are torn between hawkish Fed expectations and the timing of the BoJ’s first rate hike.

AUDUSD fell steadily in a 0.7000-0.7064 range after December retail sales fell 3.9% m/m (forecast -0.3, November 1.4%) and from broad US dollar demand due to negative risk sentiment.

Todays US data includes Chicago Purchasing Managers Index, Case-Shiller Home Price Index, the Employment Cost Index and Consumer Confidence.