USD/CAD Daily Price Forecast – Sino-U.S. Trade Optimism to Influence Rally in Favor of CAD

USDCAD trades with dovish bias as positive crude oil price and Sino-U.S. trade talk related headlines influence rally in favor of the Canadian Dollar.
Colin First

The USDCAD pair saw parabolic price move over the last 24 hours. While price action was rangebound for the majority of yesterday’s trading session, the pair saw positive price action during American market hours as US Dollar gained strength in the broad market despite mixed macro data outcome in the U.S. economic calendar as headlines hinted at progress in Sino-U.S. trade talks. Reports hit the market that both China & U.S. are preparing several agreements which are expected to be signed in the near future ensuring a trade deal between the two nations. These reports inspired long term U.S. government bond yields to see a sharp rise in the American market hours providing Dollar bulls with fundamental support required to establish a positive price rally.

Crude Oil Price Underpins CAD Bulls

However, the Dollar last gains during Asian market hours as investors concerns over decreased house sales in  U.S. markets and reduced industrial activity from macro data updates finally caught up with the bond market. This resulted in Dollar seeing sharp decline erasing all overnight gains as it lost its fundamental support. Further, optimism surrounding the trade deal between the two nations resulted in crude oil price hitting new 2019 highs in both spot and futures market. This resulted in the pair seeing further declines as Canadian Loonie is a commodity-linked currency and gains whenever crude oil price spikes in the broad market. Further, trade talk optimism also underpins risk appetite in the broad market resulting in a rally in favor of CAD. As of writing this article, USDCAD pair is trading at 1.3178 down by 0.40% on the day.

Investors now await further headlines on Sino-U.S. trade talks as Chinese Vice Premier Liu He and US President Donald Trump are expected to meet face to face for high-level trade talks. Once the trade talks conclude, headlines are expected to provide insight into the contents of trade agreements prepared by both nations which are expected to be signed by both parties in the near future. The headlines pertaining to Sino-U.S. trade talks will provide directional cues for short to medium term price action while investors wait for speech from multiple FOMC members in the U.S. and Canadian Budget balance / retail sales data for meaningful shortt term trading opportunities. Moving forward, given the increased risk appetite and focus on Sino-U.S. trade talks combined with fundamental support from positive crude oil price in the broad market USDCAD pair is likely to maintain downside price action for rest of the day as the trading session comes to close for the week.

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