The Loonie is getting caught in the crossfire of the trade jabs between Trudeau and Trump and the morning’s price action reflects the kind of hit the Loonie can take if those tensions come up to something bigger. Investors and traders are clearly nervous about the developments – and what it may do to a NAFTA deal – and the focus has firmly shifted away from a Bank of Canada rate hike in July. USD/CAD opened with a gap higher today, and tested the 1.3000 handle as it posted a high of 1.3009. However, the pair subsequently fell back as it has done so last week in previous sessions as well after breaching the figure level. The sharp decline comes into focus as a result of continues escalation in dispute between US & Canada post G7 summit proceedings.
USDCAD Hangs On
Top White House officials accused Canadian PM Trudeau of backstabbing the US after President Trump called him “very dishonest and weak”. Further, the risk sentiment soured as Trump withdrew support for a G7 communique which called for a fair and balanced trade. Looking ahead the FX desks may offer USD on fears the heightened trade tensions may force the Fed to go slow with the rate hikes. As the G7 meeting failed to provide any sparkle the ‘war of words’ between Trudeau and Trump is going to be a key focus for the Loonie in the week ahead – along with oil prices as we get closer to the OPEC and Non-OPEC meetings in Vienna next week.
This is a very light week for the Canadian dollar economic calendar. On Thursday, we’ll see the new house price index for April. On Friday, we’ll see manufacturing shipments for April as well as cross-border securities investments for April. Last week, changes in employment were both below expectations and fell relative to previous monthly figures. 1.3180 was a support line in 2017 and now turns into resistance. 1.3125 is the high point for 2018 so far. 1.3065 was the high point in May and also earlier in the year and with many investors focusing on 1.30 handle that becomes the resistance zone in short term. Expected support and resistance for the pair are at 1.2950 / 1.2920 / 1.2856 and 1.3000 / 1.3040 / 1.3070 respectively.
This article was originally posted on FX Empire
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