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USDCAD offered on broad USD selloff following positive North Korea headlines. Negative trade/NAFTA developments pushed to the side for now. Bank of Canada meets tomorrow.

CXI March 6th, 2018

Summary

  • USDCAD: Traders wasted no time yesterday extending gains for USDCAD in the wake of Trump’s early morning tweet about Canada, tariffs and NAFTA.  Horizontal chart resistance at 1.2925 gave way easily and so the market made a bee-line for the next resistance level, which was 1.2975-1.3000.  Once this level was reached however, USDCAD struggled.  The broader USD shrugged off the stronger than expected US Services ISM figures, and more importantly EURUSD regained 1.2330-40 into the London close.  This created a broad USD offered tone for the rest of the day yesterday; a trend which was hard for USDCAD longs to fight.  After one last attempt higher in the 3pm hour, the USDCAD rally failed at 1.3000 and the market closed NY trading below 1.2975 (which was not a great close technically).  Traders made an attempt to move the market back above the 1.2975 level in early European trading on the back of negative headlines late yesterday from the NAFTA negotiators, but that rally attempt fizzled out again in the 5am hour (another negative) and then the floor fell out for the USD more broadly on some North Korea headlines.  The headline said “North Korea open to denuclearize if regime safety guaranteed”, and with that the USD is falling apart as the market removes some of the “USD safe-haven” premium that would have been associated with an escalation in North Korean tensions.  It’s a bit of an odd move right now considering the USD never really had a safe-haven bid to it because of recent North Korean tension, but this headline is known in trading circles as a “risk-on” headline and the USD normally doesn’t fare well under such scenarios.  With this development, USDCAD has now tested the 1.2860-70 support level.  We think USDCAD will now try to consolidate the losses of the last few hours ahead of the Bank of Canada interest rate decision tomorrow.  Next chart support is 1.2830-40.  Resistance is 1.2930.  This are no major economic data points out of North America today.   

     

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About the Author

Erik Bregar

Erik Bregar - Director, FX Trading

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Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

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