USD/CAD drops to two-week low amid trade optimism, WTI strength, Canadian data in focus
- USD/CAD sellers cheer trade optimism.
- The pair slumped the previous day after BOC’s upbeat tone joined broad USD weakness.
- US-China trade talks are going well, the economic calendar can offer additional volatility.
USD/CAD declines to 1.3183 by the press time of Thursday’s Asian session. The quote tests the lowest levels since November 19.
With the United States (US) President Donald Trump indicating that the US-China trade talks are going “very well”, the pair bears gained further strength to extend the previous slump led by the Bank of Canada’s (BOC) upbeat comments. The BOC praised investment as housing due to population growth and low mortgage rates. It has also been positively surprised by the strong growth in business expenditure, despite the decline in exports.
Read: Breaking: USD/CAD tumbles down upbeat BOC tone
Also supporting the move is the latest run-up in oil prices, the main export item for Canada. Upbeat inventory levels and fresh tension concerning the US and Iran seem to please energy buyers off-late.
Furthermore, the broad weakness of the US dollar (USD), mainly due to downbeat data, gave the pair sellers a competitive edge.
Traders will now look for further directions from China to confirm the recent optimism surrounding the US-China phase-one. Also, comments from BOC’s Deputy Governor Timothy Lane, Canadian Trade Balance and Ivey Purchasing Managers’ Survey, for October and November respectively, will provide additional clues.
Ahead of the busy session, TD Securities says, “TD looks for the merchandise trade deficit to widen to $2.0bn in October from $0.98bn (market: -$1.4bn), reflecting a large drop in motor vehicle exports after the US GM strike led to a parts shortage across Canadian auto plants. This will contribute to a broader pullback in export activity while a modest decline in imports will provide a partial offset. At 7:45 ET, we will hear from BoC Deputy Governor Tim Lane who will deliver an economic progress report following Wednesday's decision. Lane's speech will include an audience Q&A, with an official press conference scheduled to follow at 9:20 ET.”
Technical Analysis
Unless crossing a 200-day Exponential Moving Average (EMA) level of 1.3235 prices are vulnerable to revisit September month low near 1.3130.