The Canadian dollar is over 1.3200 as markets are becoming increasingly nervous about a full blown global trade war. The US has announced that it can withstand any tariffs that China may introduce as well as anything that the ECU may try.
Expect continued volatility.
USDCAD 1.3200, 1.3117, 1.3100 1.3250, 1.3270, 1.3300
USD-CAD has remained buoyant after last week smashing through late May highs on route to posting a one-year high at 1.3210. The unexpectedly hawkish Fed guidance last week has given the pair an underpinning, adding to concerns about trade tensions between the U.S. and Canada. We retain a bullish view of USD-CAD, partly on the Fed versus BoC policy outlook, partly on the recent, sharp oil price declines (seen into the OPEC and Russia meeting this Friday), and on the view that trade tensions are likely to drag for the foreseeable. Support is at 1.3019-20.
EUR-USD has recovered the 1.1600 handle after more than reversing losses that were seen during the early part of the London AM session. The low is 1.1565 while the high, posted just earlier, is 1.1610. Both the low and the high are comfortably within the range that was seen on Friday (1.1543 to 1.1627), and we would characterise the prevailing price action as a consolidation of the sharp losses that were seen in the wake of the ECB’s policy decision last Thursday, which wrapped a well-anticipated end-of-QE announcement with dovish-tilting guidance. The ECB’s stance emphasizes the Fed’s relatively hawkish stance, which should keep EUR-USD a sell-into-rallies trade. The pair’s weekly close on Friday below the previous weekly close at 1.1659 affirmed bear trend credentials, and, after a two-week hiatus, the down trend that’s been in evolution since mid April looks to be back in effect. EUR-USD has resistance is at 1.1627-30.