As per media yesterday, high level negotiations pick up again about NAFTA between the US, Canada and Mexico. US president Trump said on Monday, that he talked with Mexico about doing something very dramatic, very positive to reach a trade deal. Most sticking points continue to include car content rules, the expiration clause and Trump’s threats of tariffs on foreign cars. It should be noted that Canada and Mexico remain optimistic about reaching a deal, though an August deadline may seem too soon. Under certain circumstances, further headlines about further progress in the NAFTA negotiations could support CAD and MXN.
USD/CAD dropped yesterday, breaking consecutively the 1.3120 and the 1.3050 support lines, reflecting the strengthening of the Looney and the weakening of the USD. We could see the pair stabilizing today maybe even correcting a bit, however the pair may prove sensitive to any further headlines regarding NAFTA as well as today’s US financial releases. Should the bears be in the driver’s seat, we could see the pair breaking the 1.2985 support line, while if the bulls take over the market we could see the pair breaking the 1.3050 resistance line and aim for the 1.3120 resistance hurdle.
According to media, after the US decision to impose tariffs on steel and aluminium, EU, Mexico and Canada decided to retaliate. The US decision to deny exemptions and proceed with the tariffs was cited as necessary to protect US domestic industry and national security. Considering that China is in a similar status, we could be seeing the ignition of a global trade war for the US. Should there be further escalation on the situation we could see safe havens strengthen.
USD/JPY after trading in a sideways manner yesterday, rose during the Asian morning today, breaking the 108.95 resistance line, now turned to support. We could be seeing the pair moving in a sideways movement, however it could be the case for USD/JPY to be sensitive to any fundamental news regarding
trade wars as well as the release of the US employment report. Should the bulls take over, the pair could aim for the 109.75 resistance level. Should the bears take the reins, we could see the pair breaking the 108.95 support line and aim for the 108.50 support barrier.
Canadian Prime Minister Justin Trudeau stated yesterday that NAFTA negotiations are moving forward in a significant way. The statement came after US officials made a number of optimistic comments about a preliminary deal on NAFTA. Furthermore, Mexican officials stated that with enough progress, the leaders of the three countries could make an announcement at a regional summit in Peru next week. Should there be further positive headlines for a deal in NAFTA we could see the CAD strengthening albeit yesterday’s comments did not seem to have a significant impact on USD/CAD.
USD/CAD traded in a sideways manner yesterday, testing the 1.2715 resistance line. We see the case for the pair to continue to trade in that manner however the pair may be heavily influenced by the release of the US and the Canadian Employment data later on today. Should the bulls take the driver’s seat we could see the pair breaking the 1.2800 resistance level and aim for the 1.2910 resistance hurdle. Should the bears have the upper hand we could see the pair trading south breaking the 1.2715 support line and aim for the 1.2610 support barrier.