“¢ Weekend news of a new NAFTA deal (USMCA) triggers a weekly bearish gap.
“¢ Bullish crude oil prices underpin Loonie and add to the downward pressure.
“¢ A modest USD uptick helped ease the bearish pressure and bounce off lows.
The USD/CAD pair held on to its heavily offered tone through the early European session, albeit seems to have found some ahead of the 1.2800 handle.
Against the backdrop of Friday’s hawkish comments by the BoC Governor Poloz and upbeat Canadian monthly GDP print, news that the US and Canada have reached a new trade deal to replace NAFTA provided a strong boost to the Canadian Dollar.
After Friday’s slump of nearly 140-pips, the pair opened with a bearish gap and dropped to over four-month lows, further weighed down by the ongoing bullish run in crude oil prices. In fact, WTI crude oil prices climbed further beyond the $73.00 mark, or fresh four-year highs, and further underpinned the commodity-linked Loonie.
The selling pressure, however, now seems to have abated as market participants preferred to wait for the exact details of the new NAFTA deal or the USMCA as it is now called. This coupled with a modest US Dollar uptick, supported by a goodish pickup in the US Treasury bond yields, further assisted the pair to rebound around 20-25 pips from an intraday low level of 1.2814.
Later during the early North-American session, the release of US ISM manufacturing PMI will now be looked upon for some short-term trading impetus ahead of the BoC Deputy Governor Timothy Lane’s scheduled speech.
Technical levels to watch
The 1.2885-90 region might now act as an immediate resistance, above which a bout of short-covering could lift the pair further towards mid-1.2900s. On the flip side, weakness below the 1.2815-10 region (multi-month lows) now seems to accelerate the slide towards 1.2770-65 intermediate zone en-route the 1.2730-25 support area.
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