The US dollar gained across the board, including against the Canadian dollar, as the trading week started with a slightly improved risk sentiment and trade deal optimism.
The latest trade war developments suggest that the US and China could sign a phase one trade deal when Trump and Xi Jinping meet later this month, signaling a possible breakthrough in the trade dispute. Comments from US Commerce Secretary Wilbur Ross, who said that “there’s no natural reason” for the US-China meeting not to be successful, have also fueled risk appetite in the markets.
Nevertheless, the latest data on investor positioning by the CFTC showed that investors cut their bullish bets on the US dollar by $2.45 billion, taking the aggregate long position to $12.5 billion — the lowest level since August.
Market participants are likely still scrutinizing the decisions made on the Fed and Bank of Canada meetings last week. As a reminder, the Fed lowered rates by 25 basis points and insisted that the mid-term cycle in monetary adjustment is completed, meaning there are no changes to the rates any time soon.
However, the US labour market is still looking healthy with 128K new jobs created in October and the unemployment rate staying near record-lows at 3.6%.
Technicals suggest that the pair is still consolidating the gains made last week as the price bounced off the 38.2% Fib level this morning. As of 2:50 p.m. London time, the pair traded at 1.3147.
Last week’s high of 1.3208 is currently acting as a mid-term resistance level for the pair, while the week’s low of 1.3042 could attract new buyers to the market.