The Canadian Dollar started Monday’s trading session sharply lower against its US counterpart after news of Saudi Arabia expelling the Canadian ambassador crossed wires. The Saudi Press Agency, the nation’s official news outlet, also announced that the country would freeze all new trade and investment deals with Canada. This move comes after Canadian Foreign Minister Chrystia Freeland urged Saudi authorities over Twitter to release human rights activists from prison. However, the currency pair’s upside momentum reversed throughout the Asia/Pacific trading hours. Negative impacts of the Saudi Arabian investment and trade embargo may be overshadowed by Canada’s higher inflation and better than expected economic growth. The BOC, which recently raised rates to 1.5% at their July meeting, has been increasingly hawkish and alluded to more increases this year. According to the Saudi Press Agency, Saudi Arabia has halted the development of any further trade or investment with Canada, allegedly after Canada formally weighed in on Saudi Arabia’s human rights record, specifically on the imprisonment of Samar Badawi, the sister of Raif Badawi, a blogger who is frequently critical of the Saudi regime and is also currently in prison.
Greenback’s Momentum Supported by Positive Job Data But Limited on Crude Oil Price action
On Friday, the pair turned lower and dropped to a fresh 1-1/2 month low in reaction to the disappointing headline NFP print, showing that the US economy added 157K new jobs in July. The negative reading, however, was largely negated by an upward revision job gains for May/June and in-line hourly wage growth data, which extended some support to the US Dollar. Bullish traders once again showed resilience near 100-day SMA, with a follow-through USD uptick helping the pair to gain some positive traction on Monday. Meanwhile, positive crude oil prices, which tend to underpin demand for the commodity-linked currency – Loonie, kept a lid any meaningful up-move for the major, at least for the time being. Most popular US Crude instrument WTIUSD is currently trading at $70.16/b up 1.07% on the day.
In absence of any major market moving economic releases, either from the US or Canada, the pair seems more likely to continue with its subdued price action and trapped within a short price range. The 1.3050/55 region might continue to act as an immediate strong barrier, above which the pair is likely to make a fresh attempt towards reclaiming the 1.3100 handle. On the flip side, the 1.2965-60 regions remains an immediate strong support to defend, which if broken might turn the pair vulnerable to slide further towards 1.2930-25 intermediate support en-route the 1.2900 handle.
This article was originally posted on FX Empire
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