The Canadian dollar recovered some ground against the US dollar in today’s trade. This was possibly pulled along by the outperforming risk-currencies (AUD and NZD) and increased risk appetite in the markets.
News flow around the “phase one” trade deal between US and China remains broadly positive, with both countries reportedly agreeing to roll back tariffs on each other’s goods in phases as trade negotiations heat up.
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The meeting between Donald Trump and Xi Jinping, which had initially been scheduled for mid-November, will now likely be delayed to December with the UK, Sweden, or Switzerland as possible venues.
The Canadian dollar is also supported by higher oil prices, with Brent crude up around 1.1%. Markets likely expect that a positive trade deal outcome will spur global economic growth and increase energy demand.
While the USD/CAD pair didn’t see a lot of movement in today’s trading session, this could possibly change tomorrow. This could happen as investors await Canada’s labour market statistics and the US preliminary UoM consumer sentiment report.
The technical picture of the pair shows that the recent upturn could just be a short run correction rather than a trend reversal. The pair continuously fails to break above the 50% Fib level. The level also aligns with a strong horizontal resistance zone formed by the November highs around the 1.32 level.
Nevertheless, a deterioration in the current trade optimism could see the greenback gaining on safe-haven flows and retesting the October highs around 1.3350. Especially since positive news has already been discounted by the markets.
To the downside, we see the Tuesday low of 1.3115 as a possible short-term support. Followed by the October lows around the 1.3040 level. As of 2:10 p.m. London time, the US dollar traded at 1.3175 against the loonie.
