Canada’s negotiating team led by Chrystia Freeland is in Washington, playing “Let’s Make a Deal” with President Trump acting as Monty Hall. The Globe and Mail reported Canada would sacrifice its Dairy industry to appease the US trade negotiating team. The story was posted in early Asia hours and dropped USDCAD from 1.2934 to 1.2905. The US wants a deal by Friday in order for the deal to start its journey through Congress to get approval by the end of November. President Trump said the US/Mexico deal would go ahead with or without Canada.
USDCAD is poised to test 1.2500 if a Trade deal is achieved. That’s because it would give the Bank of Canada a green light to raise interest rates and that could happen as early as next week.
Elsewhere, EURUSD drifted lower. The German Gfk Consumer Confidence survey was a tick lower than forecast at 10.5 (forecast 10.6). Moody’s downgraded 20 Turkish banks, and USDTRY rallied close to 2%, serving to remind traders that Eurozone vulnerability to the Turkish crisis has not disappeared.
GBPUSD drifted lower in Asia and then bounced from 1.2845 to 1.2900 in early New York trading, underpinned by rumours that the EU and UK would extend the negotiating deadline from the end of October to the middle of November. Some analysts believe that the longer deadline raises the risk of a “no-deal” Brexit. If so, the GBPUSD rally won’t be sustained.
USDJPY remains in a downtrend while prices are below 111.60. The Antipodean currencies are trading off of US/China trade headlines.
US Q2 GDP is forecast to rise 4.0%, q/q which is a tick lower than the previous release. Canada’s Current Account deficit is forecast to narrow from -$19.5 billion to $15.2 billion.
USDCAD Technical Outlook
The USDCAD technials are bearish, fueled by the break below the 1.2940-60 area which targets 1.2815, then 1.2680 and 1.2520, representing the 50.0, 61.8 and 76.4 Fibonacci retracement levels of the February to June 1.2250-1.3385 range. If the Canada/US trade talks break down, USDCAD will rally toward 1.3400. For today, USDCAD support is at 1.2890 and 1.2820.
Today’s Range 1.2870-1.2960