It appears that the upcoming NAFTA deadline will come and go with no results. Trump’s trade chief, Robert Lighthizer, has indicated that the deadline will not be met. Since it normally takes years for trade talks to be thoroughly analyzed and agreed upon, analysts believe that while all three countries are still negotiating, there is still a chance for an agreement sooner than later.
Oil prices have reached four year highs, with yesterday’s lower inventory numbers and the prospects of renewed Iran sanctions, oil reached $80 USD a barrel for North Sea Brent, while in North America oil was over $72 USD for West Texas. One major European oil company, Total SA, has announced that it has stopped further investments in Iran , as a result of the new sanctions. It feels that the risks are just too great at this time.
Expect the USDCAD to remain a little range bound even with stronger oil prices, as the uncertainty of the NAFTA talks overhangs the market.
USDCAD 1.2797, 1.2788, 1.2783 1.2815, 1.2820, 1.2845
USD-CAD flopped back to the mid 1.2700s after flipping to a peak of 1.2924 earlier in the week. The recent ramp up in U.S. yields has been a support on the one hand, while the concurrent ramp up in oil prices have been a downward driver on the other hand, which have accounted for the choppy price action while leaving USD-CAD showing little net direction over the last week. We expect more of the same. Support comes in at 1.2729-30.
EUR-USD has turned back under 1.1800 after rebound gains stalled at 1.1837. The political evolutions in Italy have continued to see Italian yields rise, and with them other peripheral Eurozone sovereign yields while safe-haven demand for German paper has suppressed Bund yields, which in turn has been weighing on the euro. We expect the directional bias will remain to the downside in EUR-USD, which yesterday clocked a five-month low at 1.1763. The pair is in what is now its fifth consecutive weekly decline, which has been structured on the dollar’s rising yield advantage. Resistance is at 1.1845.