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  • Forex today was risk on due to the NAFTA surprise breakthrough.
  •  In a news conference, President Donald Trump called the deal “truly historic.” The deal came just four days after U.S. Trade Representative Robert Lighthizer warned us that there were limited chances that a Canada deal would be reached in time to meet a U.S.-imposed deadline.

The Candian dollar lifted all spirits in the commodity complex and took the bears on with force whereby USD/CAD broke below the 200 D SMA for the first time since April.  “A  positive resolution to NAFTA talks  provided a tailwind to risk sentiment although equities gave up most of their intraday gains early into the session, leaving major indices modestly higher (SPX: +0.4%, TSX: +0.2%). NAFTA had a more substantial impact on rates, where Canadian yields rose by 8bps across the front-end and belly to widen the spread against Treasuries, which saw a more modest selloff. CAD (+0.7%) was the top performing currency in G10FX against the greenback which saw USDCAD trade below 1.28 for the first time since May,” analysts at TD Securities explained.  

Currency action

As for other currencies, the single unit was pressured from the off and traded down from 1.1625 the high and kept going through the day into the NY session, bottoming at 1.1566. The Italian contagion risk is a concern, where downbeat comments from the EU over Italy’s budget dragged the pair toward 1.1560. We had the EC’s Dombrovskis commenting on Italy’s budget who said it adds weight while the Dutch Finance Minister Hoekstra said signals from Italy are not reassuring – adding that the initial budget assessment not compatible with EU stability and growth. However, at the same time, German retail sales also disappointed for the second month running. Bears are lining up for an attack at the 1.1530/10 key support area. Cable was unable to break down Friday’s high on a  UK mfg PMI beat, falling just shy of the 1.3016 level where the data arrived as 53.8 vs 52.5 forecast. eyes are back on Friday’s ow down at 1.3000, the lowest level since September 12 as investors hold their breath over continues Brexit headlines that are flooding the wires due to the conservative conference this week. There was a slight bid in the pair on talk of Irish border compromise but bears pounced as sceptics reign. The cross was confined to a tight range as a result of broad dollar strength whereby both cable and the euro were pressured on Monday. The range for the cross was between 0.8858 and 0.8915 but was mostly traded between 15 pips around the 0.8880 mark. USD/JPY was sat pretty at 114 the figure for the most part of the sessions, piercing the 161.8% fib and remained consolidated despite the ISM mfg employment index at the highest since Feb as an intro for the nonfarm payrolls this week while the US ISM numbers are streaks ahead of the EZ, Japan and China’s. What will be crucial from here are stocks performances, especially in the US and Japan while attention will revert back to a problematic China and European market. As for the Aussie, it continued to hold up on the 0.72 handle, pushing the envelope for a break through the key 38.2% fibo at 0.7227. So far, the wider AU-US spreads and disappointing China PMI data have had little effect but should there be a correction in USD/JPY, AUD/JPY sill come under pressure and that should sink the major commodity currency in an environment of dollar strength and struggling industrial metal prices. The CRB was up sharply due to oil at the highest in four years and headed for a potential near-term top en-route to R2 at $77.49 WTI.

Key notes from US session:

Wall Street starts off fourth quarter on a strong foot as investors cheer new NAFTA deal

Key events ahead:

RBA: “The Board is certain to keep the cash rate on hold” – Westpac