- During the early hours of Thursday, the US dollar has dropped against the Canadian dollar, as we continue to bounce around the crucial 1.42 level.
- The market is also bordered by the 50 Day EMA above, which could offer a little bit of resistance.
- After that, then you have the 1.43 level, an area that should have quite a bit of market memory attached to it as it was previously support.
All things being equal, this is a market that I think will remain very noisy, because we are still seeing a lot of remarks coming from both sides of the border. While a full-blown trade war is almost certainly more dangerous for Canada than it is the United States, it is more likely than not going to cause massive disruptions either way. The Canadian economy is almost wholly dependent on the United States, so at the end of the day things will have to be settled unless Ottawa is comfortable with the Canadian dollar trading at $1.75 in the near future. This isn’t to say that a trade war wouldn’t hurt the United States, it’s just to say that there are plenty of people out there willing to sell to the United States in Canada’s place.
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Looking for Clarity
I think at this point in time most traders are just simply looking for clarity. If the Canadians can get a deal done with the Americans, it probably benefits the Canadian dollar, despite the fact that the Canadian economy is struggling a bit at the moment. Quite frankly, I think there are a lot of concerns in Canada that over the longer term will play out in a weaker Loonie. However, I do think that there would be a short-term knee-jerk reaction as we have already seen from simply extending the tariffs by 30 days to as far as implementation is concerned.
At this point, I still don’t like trading this USD/CAD pair because a quite frankly will come down to the occasional comment coming out of Ottawa, or the occasional tweet coming from Donald Trump. It is still very much in an uptrend, but we are trying to find some type of equilibrium at the moment and therefore it becomes very difficult.
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