The Canadian dollar continues its downward trend, the U.S. has just announced imposing tariffs on $50 Billion worth of Chinese imports while Canadian retail sales came in at a lower than anticipated level. Manufacturing sales dropped a monthly 1.3 percent in April. Sales were down in 10 of 21 industries, representing 49.6 percent of the manufacturing sector. Sales in the petroleum and coal products and transportation equipment industries accounted for much of the decline in April.
Meanwhile China has promised a tit for tat approach to Washington’s announcement, to which the U.S. came back with, “The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers or taking punitive actions against American exporters or American companies operating in China,” Trump said in a statement.
The Canadian dollar is caught in a spiral as it appears that the NAFTA talks may be just that, just talks, the U.S. appears not to back down on what it wants and it may be a long time yet before there is an agreement.
USDCAD 1.3145, 1.3135, 1.3130 1.3200, 1.3233, .13255
USD-CAD smashed through late May highs on route to posting a one-year high at 1.3147. The unexpectedly hawkish Fed guidance this 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, and partly on the view that trade tensions are likely to drag for the foreseeable. Support is at 1.3019-20.
EUR-USD recovered to the 1.1600 during the London AM session after extending to a fresh 16-day low of 1.1555 in Asia trading. The ECB’s dovish-tilting guidance yesterday served to emphasize the Fed’s relatively hawkish stance, sending the euro spinning, especially against the dollar. EUR-USD was perhaps ripe for a rebound, having been trading above 1.1820 ahead of the ECB’s announcement yesterday, with the magnitude of consequent losses the sharpest over a day since October 26th-27th of last year. After a two-week hiatus, the price action reaffirmed a bear trend that’s been in evolution since mid April. Resistance comes in at 1.1669-70. We would look for a weekly close today below the previous lowest weekly close at 1.1659 to affirm the bear trend credentials.