Media reports suggested that Canadian officials are convinced that the US will leave the NAFTA agreement. The comments casted doubts about prospects on negotiations to modernize NAFTA, which are to have a sixth round on January 23-28. In the past, president Trump had repeatedly threatened to abandon NAFTA, unless major changes were made and was recently quoted saying “I want out” as current negotiations seemed to produce little results. It remains uncertain however, if USA would quit NAFTA even if Trump gave the required six month warning. On the Mexican side of the trilateral negotiations, there were no comments on the issue but analysts predict that should
Trump trigger the six month leaving process, Mexico may pull out of the negotiations. Analysts predict that the US may ultimately not pull out of the agreement, but the market has extensive concerns and a high amount of uncertainty just showed up on the horizon.
USD/CAD rose substantially yesterday, reflecting the recent NAFTA developments, however it stabilized this morning at the 1.2520 support line. We see the case for the pair to continue trading in a sideways manner, however it may be quite sensitive to any further developments on the issue. Also, any good readings regarding today’s US financial data may influence the pair towards a further rise. Should the pair come under renewed buying interest it could break the 1.2593 resistance level and aim for the 1.2650 resistance hurdle. On the other hand should the pair come under selling interest it could break the 1.2520 support level and head for the 1.2450 support zone.