- The US and China keep engaging in the war of words.
- The expected weakness in the Chinese economy may add pessimism for the commodity market.
- BOC is in the spotlight.
Trade pessimism surrounding the world’s two largest economies continues to weigh on global markets during early Wednesday. The USD/CAD pair, being no objection, portrays WTI weakness and tension ahead of the BOC meeting while flashing 1.3490 figure on the chart.
Odds of escalating the US-China tension rose after the US President Donald Trump recently said in Japan that tariffs on China could “substantially” increase.
President Trump’s comments were followed by China’s threat to limit rare earth metals for the US. The dragon nation also warned the global leader, as per the Chinese daily, to not underestimate China’s ability to fight.
While the US-China stalemate offered background music to the commodity weakness and dragging Canada’s biggest export item crude south, Bloomberg report of likely weakness in China’s growth spread worries for Antipodeans and crude.
Trades may now concentrate on weekly crude inventory and comments from the US and Chinese lawmakers concerning their likely trade relations. Also, monetary policy meeting by the Bank of Canada (BOC) will gain market attention.
The Canadian central bank is likely not to alter present monetary policy with 1.75% overnight rate.
TD Securities also expect trade-related comments to take place in today’s BOC event as they said,
“The apparent deterioration in US/China relations should feature prominently, but the Governor’s constructive comments on the labor market tilt the balance of risks towards a more optimistic statement. We like positioning for higher 5-year rates and a flatter curve.”
Technical Analysis
While April month high near 1.2520 and an upward sloping trend-line since January, at 1.2570, act as strong upside resistance, the pair needs to clear 1.2500 in order to justify its immediate strength.
Meanwhile, 50-day SMA near 1.3410 and 1.3360 could offer nearby supports to the quote ahead of dragging it to 100-day simple moving average (SMA) level near 1.3335.
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