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  • USD/CAD is tracing the footsteps of the bulls and bears in the oil market which is a mix of geopolitical and industry related fundamentals.
  • USD/CAD is currently trading at 1.3448, between a range of 1.3442 and 1.3494.  
  • Trade war risk is back at the fore, but markets are optimistic that misunderstandings between Beijing and U.S. officials can be resolved and a deal struck in due course.  

Compared to Asia’s session, there is a better risk tone as investors have had time to read into the nuts and bolts of trade war noise that kicked off a risk-off start to the week overnight following a series of headlines that put trade negotiations back on ice.

First of all, Trump threatened tariff hikes and thin markets speculated that China would retaliate in some form of words. When the news dropped that China would cancel a trip to Washington this week, risk assets bleed out further, extending the opening gaps across the Aussie, CAD, Yen and commodities specifically.  

However, there has been some optimism seen through the price action in recent trade, with WTI bouncing back from the grave which has helped lift the Candian dollar out of the doldrums as well.  WTI has dropped to $60.02 while USD/CAD had touched as high as 1.3492 before paring back most of those gains down towards Fridays close at 1.3436, partially closing the opening gap on expectations that a trade deal will be secured, eventually, once some misunderstandings between negotiators are resolved.

ING Bank’s  view:

“In our view Trumps tweets are  a negotiation strategy. In a recent speech to US Governors, Trump confirmed our longstanding interpretation of his  strategy, saying that he can only secure new trade deals by imposing/threatening tariffs.  Although Trumps strategy is risky, because the Chinese could refuse to negotiate at gunpoint and decide to walk out on the trade talks, both sides have invested too much political capital in the negotiations to let this happen.  Trump plays hard ball, but the renegotiation of NAFTA has shown that he is prepared to water down  some of his toughest demands,”

Analysts at ING Bank explained

Update:

China still ‘preparing’ delegation for US trip despite Donald Trump’s threat to increase tariffs –  SCMP Reporters    

South China Morning Post is reporting that Chian still plans to move forward with talks:

China is still preparing to send a delegation to Washington for the trade talks despite the latest threats by US President Donald Trump to increase tariffs, Foreign Ministry spokesman Geng Shuang said on Monday.

USD/CAD Forecast: Price slides below 61.8% Fibo at the end of a busy week, U.S. CPI next on the cards
 

USD/CAD levels

From a technical perspective, the price remains on course within a bullish channel of which the downside was recently exhausted. If price action abides by the rules,  the top side of the ascending channel’s resistance at the 127.20% Fibo extension of the range located at 1.3820 remains compelling. However, resistance within the channel will be a challenge at the 78.60% Fibo, as will breaking beyond a full retracement at 1.3660. To the downside, if the 50% Fibo gives, at 1.3365, then bulls can look for a run to the 38.2% Fibo that will bring in the 23.6% Fibo and trendline support (and 200-D SMA) where a break out opens risk back to 1.3070 support and 1.2780 below there.