USD/CAD Daily Price Forecast – USD/CAD Range Bound Ahead of FOMC Update despite NAFTA Headlines

The USD/CAD pair struggled for a firm direction and seesawed between tepid gains/minor losses through the early European session on Wednesday. The pair continued with its subdued trading action for the second consecutive session and remained confined in a narrow trading range around mid-1.2900s. A subdued US Dollar price action, this time led by a modest retracement in the US Treasury bond yields, failed to provide any meaningful impetus. As of writing this article, the pair was trading flat at 1.2954 up 0.01% on the day. Adding to this, crude oil now seems to have entered a bullish consolidation phase near four-year tops and also did little to influence demand for the commodity-linked currency – Loonie.

Canada Unlikely to Make Major Concessions Unless the Deal is in Favor of Canada

Meanwhile, investors’ reluctance to place any aggressive bets uncertainties surrounding the North American Free Trade Agreement (NAFTA) and ahead of the key event risk – the highly anticipated FOMC decision further collaborated to the pair’s range-bound price action. News hit market yesterday that Canada is refusing to make necessary concessions in order to achieve a trilateral pact that will update and replace NAFTA. The US administration has recently turned up the heat on Canada, trying to push for a concluded deal by this Sunday or else Canada risks being left out of a revised NAFTA agreement. Canada has largely brushed off the attempted gambit, saying they have no interest in focusing on timelines.

Canadian Prime Minister Justin Trudeau remains firm on his stance that Canada will only agree for deal if it favors Canadian govt and with Mexico stating that it doesn’t want to go forward with a deal unless Canada is also involved while President Trump remains firm on his timeline, a new trade war looks highly likely but there is also a chance of bilateral agreement between US & Mexico. For now investors have opted to wait patiently till the month end to gauge what decision Canada makes and how it impacts the market while immediate focus remains on US FOMC update. Immediate resistance is pegged near the 1.2970-75 regions and is followed by the key 1.30 psychological mark, above which a bout of short-covering could lift the pair further towards 1.3040 supply zone. On the flip side, the 1.2935-30 region now seems to protect the immediate downside, which if broken might turn the pair vulnerable to slide back below the 1.2900 handle towards testing 200-DMA support near the 1.2865 area.