- Dollar rallies as NAFTA hopes for 2018 slip away.
- US deadline for May 17th agreement slips by as Mexico heads for an election.
The USD/CAD is the big mover of the Asia session for Friday, climbing to 1.2846 on NAFTA headlines in the overnight session. The pair is back into 1.2830 as of writing, but the pair is decidedly bullish to end the week.
The US Dollar is getting propped up on NAFTA headlines today, as renegotiations failed to produce a workable agreement by the US’ self-imposed Thursday deadline. Chances of a successful NAFTA closure for 2018 are looking slim as Mexico gears up for a Presidential election, and the incoming President of Mexico is likely to shake up the entire negotiating team, bringing the entire process to a grinding halt. As FXStreet’s own Ross Burland pointed out earlier, “President Trump can’t just sign it into law because the U.S. Constitution gives Congress, and not the President, power to regulate commerce with foreign nations – so there are plenty of hurdles along the way through Congress under the trade promotion rules before anything can be signed off and agreed, hence why House Speaker Paul Ryan calculated that lawmakers would need to see a deal by TODAY in order to be able to vote on it this year.”
The Loonie is waffling against the US Dollar on the news, as a lack of solid trade agreements leaves Mexico and Canada exposed to trade-shriveling tariffs and levies on import/export goods and services, which would hamper manufacturing and economic growth across the North American continent.
USD/CAD levels to watch
Friday sees CPI and Retail Sales figures for Canada, and as James Chen, CMT noted, that could set the pair’s direction looking forward: “USD/CAD is generally still in the midst of a pullback from last week’s high just short of the 1.3000 handle, a key resistance level. In the process, the currency pair has dropped back below its key 50-day moving average. The next directional move for the pair will be driven largely by Friday’s Canadian data releases, crude oil prices, and whether the US dollar remains in surge mode or begins to lose momentum. As the US dollar has been technically due for a pullback, any stronger-than-expected Canadian data on Friday could result in a further drop for USD/CAD. In this event, the next major downside support barrier lies around the 1.2700 area. Any breakdown below 1.2700 could open the way for further downside towards the 1.2526 low of mid-April.”
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