After a sharp sell-off during the early London session, the US dollar managed to recover some ground against a quite resilient Canadian dollar today.
Besides the Australian and New Zealand dollar, both the Canadian dollar and the greenback are top-performing currencies today as risk appetite remained strong.
Markets are hoping for a “phase one” trade deal between the United States and China to be signed later this month after a string of optimistic comments came from trade representatives of both sides. This has underpinned risk sentiment and is likely to do so in the days ahead. Nevertheless, China has reportedly asked the US to roll back tariffs before it will proceed with the “phase one” trade agreement.
The Canadian dollar has been also supported by higher oil prices, with Brent crude up more than 1% in today’s trade. This has likely more than offset the Canadian trade balance report, which came in at -$1.0 billion — below market expectations of -$0.6 billion but better than the August data of -$1.2 billion.
From the US, we got the ISM non-manufacturing PMI which showed a strong pick up in the non-manufacturing economic activity in October. The number came in at 54.7, well above market expectations of 53.5.
From a technical standpoint, the USD/CAD pair completed a 50% correction of the recent downturn and formed candles with long upper wicks, which may signal further weakness in the short run.
While last week’s high of 1.3208 remains a strong resistance to the upside, we don’t see any meaningful support before the October 29 low of 1.3042. As of 3:08 p.m. London time, the pair traded at 1.3150.