Canada’s merchandise trade deficit widened by nearly a billion dollars in May with a 0.1% decline in exports exacerbating the move. The weaker than expected data more than offset, the better than expected Canadian employment report Canada employment rose by 31,800 jobs after two months of flat growth. The bulk of the job gains were part-time, The unemployment rate rose to 6.0% from 5.8%. StatsCanada said the increase was because more people were looking for work.
At the same time the domestic data was released, US nonfarm payrolls data and trade reports were available. Both were better than expected. NFP rose 213,000 in June, but soft details undermined the data. Average hourly earnings declined 0.2%, and the unemployment rate climbed to 4.0% from 3.8% in May.
The US dollar was sold on the news. EURUSD rose from 1.1703 to 1.1762; Sterling jumped to 1.3267 from 1.3220 and USDJPY slipped to 110.42 from 110.66.
FX trading was on hold overnight. Traders were content to digest the US/China news and wait for this morning’s US data.
Forty-eight years ago, Edwin Starr’s anti-war song, “WAR” was the top of the charts. The 2018 version adds “Trade” to the title. At 12:01 am this morning, President Trump delivered on his promise to start levying tariffs on imports of Chinese goods. He was careful not to annoy the rabid Apple constituency, as iPhones are still tariff-free.
He did manage to annoy China President Xi Jinping. China retaliated with tariffs of their own. Mr Trump sees that action as a slap in the face. He previously warned China that if they retaliated, he would put tariffs on a further $200 billion of goods. Yesterday, he upped the ante again, suggesting that $500 billion of China imports may be subject to taxes.
The action barely caused a ripple in financial markets. Asia equity indices closed modestly higher, including the Shanghai Shenzhen which rose 0.47% after an initial plunge. European bourses are trading close to flat, and that’s how US equity futures suggest Wall Street will open this morning.
USDCAD Technical Outlook
USDCAD is in an uptrend from May 31 which is intact while prices are above 1.3080. A break of minor downtrend resistance at 1.3160 would target 1.3310. A move below 1.3080 would lead to 1.3050 and then 1.2950. For today, USDCAD support is at 1.3110 and 1.3090. Resistance is at 1.3160 and 1.3190.
Today’s Range 1.3110-1.3190