The USD/CAD pair continued gaining positive traction for the fourth consecutive session and climbed to over two-week tops in the last hour. The pair built on last week’s goodish rebound from sub-1.2900 level near 2-1/2 month lows, with a combination of supporting factors assisting bulls to extend the positive momentum further beyond the 1.3100 handle. Escalating global trade tensions, especially the US President Donald Trump’s threat to exclude Canada from a new NAFTA agreement, continue to dent sentiment surrounding the Canadian Dollar. Meanwhile Trump’s threat to impose tariff on Chinese goods worth $200b this week is also causing demand for US Greenback to rise in broad market. As of writing this article, the USDCAD pair is trading at 1.3150 up 0.42% on the day.
Investors Continue to Focus Full Attention Towards NAFTA Talk Updates
Meanwhile the resurgent US Dollar demand since start of today’s market hours has been supported by a goodish pickup in the US Treasury bond yields, providing an additional boost and further collaborated to the pair’s ongoing up-move. Meanwhile, traders seemed largely unaffected by the ongoing bullish run in crude oil prices, which tend to underpin demand for the commodity-linked currency – Loonie, and kept pushing the pair higher through the early European session. It would now be interesting to see if bulls are able to maintain their dominant position or the up-move meets with some supply at higher levels as market participants start re-positioning for the latest BOC monetary policy update on Wednesday. In the meantime, today’s release of the US ISM manufacturing PMI will be looked upon for some short-term trading impetus later during the early North-American session.
An October hike is also now almost fully priced among investors and analysts who deal with CAD. The Loonie reactions around this week’s meeting are likely to be relatively muted in our view, but if anything the BOC is likely to nudge the market towards an October hike. This could cause modest CAD appreciation pressures, but NAFTA negotiations are likely to be a more important driver in coming weeks. Looking from technical standpoint, Any subsequent up-move is likely to confront immediate resistance near the 1.3050-55 region, above which the pair seems all set to aim towards reclaiming the 1.3100 round figure mark. On the flip side, the 1.3085-80 region now seems to protect the immediate downside, which if broken might prompt some additional weakness back towards 1.3040-35 horizontal zone.
This article was originally posted on FX Empire
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