The worst performing currency today was the Canadian dollar and the currency’s weakness is also a direct result of trade. Aside from singling out China, President Trump used the tariffs as a threat to NAFTA by saying that they will only come off if a new and fair NAFTA agreement is signed. These harsh words for their Northern neighbor imply that Canada will not be given an exemption. This is an important week for Canada and while the central bank may want to join in the debate, there’s no question that they will be concerned about the economic implications of the tariffs as Canada is the number one supplier of both steel and aluminum to the U.S. 1.30 is an important resistance level for USD/CAD but trade concerns are serious enough to drive USD/CAD to 1.33 and possibly even 1.35. Canada’s IVEY PMI index is scheduled for release on Tuesday – a rebound is expected after 3 straight months of weakness but the outlook for the manufacturing sector is grim given recent developments.
Technically, USD/CAD tested 1.30 today. It wasn’t able to break above it on the first try with the move hampered by the round number, 1.30 options and the 100-week SMA. If USD/CAD clears 1.3025, the rally could find resistance at 1.3075 but ultimately extend as high as 1.33.
