The USD/CAD holding 1.3000 after trade war fears hit markets again

By Admiral Markets

Source: Economic Events August 7, 2019 – Admiral Markets’ Forex Calendar

Today we want to have a look at the USD/CAD. After focussing 1.3000 into the end of the second quarter, the currency pair has seen a short rebound, stabilising above the psychologically relevant level.

One of the main reasons for the Loonie not taking on further bullish momentum, seems to be that the recent trade war fears, which not only triggered higher volatility (note: increasing volatility is usually CAD negative) but saw Crude Oil further decreasing after it got hit by around 7% last Thursday, when markets were threatened by global growth concerns after US President Donald Trump tweeted about more tariffs on Chinese goods from September onwards.

While this overall outlook makes it unlikely to see a drop below 1.3000 in the near future, or at least the short-term, the USD/CAD could probably see a push lower.

Today’s release of the Ivey PMI, giving an impression on Canada’s Business Confidence, is expected to come in at 53, slightly above last months’ reading at 52.4.

A better-than-expected reading could trigger CAD strength, since it would underline the hints from the BoC earlier in July where the central bank signalled that it currently sees no reason to follow any move by the Fed to lower rates.

That means on the other hand in our opinion that any disappointing reading could result in further USD/CAD gains back above 1.3300.

The technical key level seems to be found around 1.3260/3300: recapturing this region with backwind from a weak Ivey PMI reading would 1.3430/50 as a target on the downside.

Finding resistance here, on the other hand, leaves the currency pair vulnerable to another stint down to 1.3000/3050:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/CAD Daily chart (between May 8, 2018, to August 6, 2019). Accessed: August 6, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the USD/CAD increased by 9.4%, in 2015, it increased by 19.1%, in 2016, it fell by 2.9%, in 2017, it fell by 6.4%, in 2018, it increased by 8.4%, meaning that after five years, it was up by 28.4%.

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