The USD/CAD pair traded with a mild positive bias for the second consecutive session and was seen consolidating overnight strong recovery gains to one-week tops, just above mid-1.3000s. On Tuesday, the pair staged a solid rebound and rallied over 100-pips from the 1.2960-65 region. The up-move seemed largely unaffected by the ongoing US Dollar profit-taking slide, with a combination of factors exerting downward pressure on the Canadian Dollar and prompting some aggressive short-covering move from the very important 100-day SMA support. The initial leg of recovery move was triggered by the disappointing release of Canadian Ivey PMI, which fell sharply to 56.7 in July from 65.1 in June. This coupled with a range bound performance of Crude oil so far this month, further weighed on the commodity-linked currency – Loonie and collaborated to the pair’s goodish rebound.
Canada Starts to Prepare For NAFTA Talks
The positive momentum extended through the early European session as market participants now look forward to the release of Canadian building permits and weekly US crude oil inventories data. This coupled with Richmond Fed President Thomas Barkin’s scheduled speech might provide some meaningful trading opportunities later during the early North-American session. The USDCAD pair is currently trading at 1.3080 up 0.21% on the day and has found stable support around 1.3045 handle which is supported by price action visible in 1 hour chart. Canada’s ambassador to Washington will be in Ottawa later today for a series of high level discussions with Canadian officials to prepare for the resumption of NAFTA negotiations. David MacNaughton is expected to sit down with members of the Prime Minister’s Office and trade officials to discuss strategy and positions to make certain everyone is prepared and on the same page when formal talks with the U.S. and Mexico resume.
As of now Mexico touts progress in NAFTA talks while talks with Canada remains at a standstill. The talk between Mexico & U.S. representatives left some thorny issues unresolved but they come to an agreement on 20 topics during meeting last week to revamp NAFTA as per comment from Mexico’s economy minister. US & Mexican representatives are expected to meet again coming Friday for bilateral talks and are expected come to agreement on key factors such as auto-sector rules, tariff on Steel & Aluminum and the infamous sunset clause. From technical perspective, the ongoing up-move could get extended towards the 1.3090-1.3100 region, above which the pair is likely to head towards challenging the 1.3170-75 supply zone. Conversely, the 1.3040-30 area now seems to protect the immediate downside, which if broken might turn the pair vulnerable to break back below the key 1.30 psychological mark and head towards retesting the 1.2965-60 support zone.