USD/CAD – Canadian dollar under pressure as NAFTA talks heat up

The Canadian dollar has lost ground on Friday, continuing the trend seen on Thursday. In the North American session, Currently, USD/CAD is trading at 1.3049, up 0.53% on the day. On the release front, Canadian Raw Materials Price Index posted a strong gain of 0.7%, above the estimate of 0.0%. In the U.S, the key event is UoM Consumer Sentiment, which is expected to drop to 95.5 points.

Investors are glued to the NAFTA talks, as Canadian and U.S negotiators are scrambling to reach an agreement before a Friday deadline (which may have to be extended). The U.S and Mexico reached an agreement earlier in August, leaving Canada out in the cold, much to the annoyance of Canadian policymakers. If Canada and the U.S can hammer out an agreement, this would pave the way to a new NAFTA pact being signed by all three countries. The stakes are enormous, with some $1 trillion in trade between the three countries under the current NAFTA agreement. Canada will likely have to make some concessions, such as reducing hefty tariffs which protect the Canadian dairy industry. Still, Canadian equity markets have been on the rise, as investors remain confident that a NAFTA 2.0 deal can be reached.

The trade spat between the US and China may have take a pause, but investors remain jittery. The trade war has taken a bite out of Chinese exports, as  the “new export order” subindex in China’s official PMI dropped below 50 in August, the third straight month that the index has contracted. President Trump has threatened to slap additional tariffs on some $200 billion of Chinese products, a move which could take place as early as next week. Further tariffs would have a damaging effect on the Chinese economy, and it’s likely that China would respond in kind. The current trade spat has already seen the U.S dollar gain ground against rivals such as the euro, and fears of a global trade war could see the greenback make further gains.

Another brick in the tariff wall? OANDA Trading market note

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USD/CAD Fundamentals

Friday (August 31)

  • 8:30 Canadian RMPI. Estimate 0.0%. Actual 0.0%
  • 8:30 Canadian IPPI. Estimate -0.3%. Actual -0.2%
  • 9:45 US Chicago PMI. Estimate 63.0
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 95.5
  • 10:00 US Revised UoM Inflation Expectations

*All release times are DST

*Key events are in bold

USD/CAD for Friday, August 31, 2018

USD/CAD, August 30 at 7:55 DST

Open: 1.2981 High: 1.3048 Low: 1.2971 Close: 1.3034

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2733 12831 1.2970 1.3067 1.3160 1.3292

USD/CAD edged higher in the Asian session and is showing limited movement in European trade

  • 1.2970 is providing weak support
  • 1.3067 is the next resistance line
  • Current range: 1.2970 to 1.3067

Further levels in both directions:

  • Below: 1.2970, 1.2831, 1.2733 and 1.2666
  • Above: 1.3067, 1.3160 and 1.3292

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.