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The Loonie is not receiving love this morning after poor manufacturing sales numbers.

Jeffrey Scott

The Loonie is not receiving love this morning, despite that, in the last 1 hour, the US dollar index is falling around 0.2 percent. The resistance level mentioned in yesterday's daily commentary was breached this morning and the USD/CAD is trading at 1.3308, an increase of 0.39 percent.

The main reason for the USD/CAD increase was the manufacturing sales month to month, which came in at - 1.3 percent when the forecast was +0.7 percent. This unexpected number is giving a critical reason to the Loonie bulls to unwind long positions.

Technically speaking, the USD/CAD pair is hitting strong resistances around 1.3320 – 1.3330, which have been tested during the first week in February. At the same time, important supports are around 1.3270 – 1.3250. If we see the big picture, the USD/CAD is still within an uptrend from 2017. However, the tricky part is that the crude oil WTI is consolidating in sideways price action.

The US dollar index has not had much direction over the few last hours, but at this moment, it is falling 0.18 percent. Apparently, China has requested an extension of trade talks with the US beyond the March 1st deadline.

Furthermore, according to Bloomberg, Trump is considering a 60-day extension to the China tariff deadline and talks in Beijing are "going along very well," Trump said. Steven Mnuchin and Trade rep Robert Lighthizer joined the discussions today, along with China's Vice Premier Liu He. Xi Jinping apparently will step in tomorrow. However, officials have not yet discussed specific language for a draft agreement. Rumors say that Trump has been advised by U.S. officials not to go to China to meet with Xi in case this jeopardizes what the U.S. perceives as a negotiating advantage. Nonetheless, China wants to proceed to direct talks with Trump, for fear that he might otherwise overturn agreements reached between the negotiators.

On the release side, the retail sales advance came in at -1.2 percent when the forecast was 0.1 percent. This pushed the US dollar lower in the last few minutes, especially against the Euro.

The EUR/USD pair has settled higher, trading around the 1.1300 handle this morning after a decline in the last 24 hours, probably after better news about US-China trade. However, a weaker than expected European Industrial Production print yesterday didn’t do the single currency too many favors in yesterday’s trading session.

On the release side, Germany's economy has avoided falling into recession during the final three months of last year. Europe's largest economy registered zero growth during the fourth quarter of 2018, the country's Federal Statistics Office said.

The GBP/USD is falling 0.2 percent and it is trading at 1.2816 this morning. The release of UK CPI yesterday saw inflation fall to 1.8 percent year to year in January, sliding below 2.0 percent for the first time since 2017. The new cap on energy prices was the main catalyst for the drop and levels of inflation are now below the Bank of England’s target. It had little impact on the Cable, however.

Hearsay rumors about the possibility of a further extension to the Brexit deadline were the primary driver of GBP/USD, which traded to a high of 1.2978. However, it has since fallen as the dollar has pushed higher across the board over the last 2 hours.

MPs are to debate and vote on the next steps in the Brexit process later, as Theresa May continues to try to get a deal through Parliament. A series of amendments will also be considered for debate.

The AUD/USD is increasing 0.35 percent and trading at 0.7110 this morning. However, traders are reluctant to do too much in advance of the much-anticipated US-China trade talks. With little by way of local economic data on the horizon, investors will focus on this as well as a set of China inflation prints, due at 8:30 pm EST.

The NZD/USD is holding firm this morning, trading at 0.6845, an increase of 0.73 percent, following the post-RBNZ statement rally – the central bank was a lot less dovish than many market participants were expecting and a short squeeze ensued. Investors will now be looking to local business manufacturing data, as well as US-China talks, of course.