USD Gains Momentum against Loonie Ahead of G7 Summit

The USD/CAD pair is seen extending its rebound into a third day today, as the bulls take on the 1.30 handle once again heading into the Day 1 of G7 Summit and Canada’s labor market report.  The pair traded slightly range bound during Asian market hours but broke to the upside in early European session, mainly in response to increased demand for the US dollar, as markets prefer to hold the world’s reserve currency ahead of the G7 meeting, where the global trade and tariffs discussions are likely to be the main focal point. Also decrease in Crude Oil price due to declining demand for Oil in China, one of the major Oil importers of the world has resulted in dovish influence on commodity linked currency- Canadian dollar.

USDCAD Moves Higher

Bank of Canada Governor Poloz when answering questions yesterday mentioned that Canada is seeing solid economic expansion however it will take more time for Stabilization of housing market than expected in April and that impact of new tariff will be incorporated during July’s monetary policy meeting. He also mentioned that trade risks seemed higher now than it was during last policy meet. While US President Trump tried to have separate negotiations with Canada and Mexico about new tariffs for steel and aluminum trade and reaction of countries for Trump’s decision the move was rejected by both countries. And Trump’s decision has been publicized in many media as antagonistic approach towards trusted allies. The G7 summit scheduled to start today is hosted in Canada and Trade war related talks are expected to be main focus of investors and Analysts.

On release front Canadian calendar is expected to see employment change and unemployment rate data while US calendar is set to see wholesale inventories and trade sales data and U.S. Baker Hughes Oil Rig Count. Employment data could have slight impact on Canadian dollar momentum during North American trading hours however any update released from G7 summit on trade war talks will have higher impact on the pair’s momentum. Expected support and resistance for the pair are at 1.2958 / 1.2927 / 1.2894 and 1.3030 / 1.3056 / 1.3099 respectively.