Investors are beginning to forget about the Italian elections and are focusing their attention on global trade and problems caused by Trump's recent proposals regarding import duties. Some people think that criticism from abroad and also from their own staff will induce the US president to change his mind, which helps to slightly weaken the risk aversion in the markets. In the meantime, you can count on retaliatory actions of the rest of the world. This morning we hear that the European Commission is considering introducing tariffs on US goods, including for steel, jeans, and bourbon.
If we return to uncertainty about the future of the global recovery (which may be inhibited by trade wars), then we are coming back to strengthening JPY. The EUR should also perform well when the overrun of the political risk premium has disappeared. USD will give way to safe currencies, at least in the short term. In the medium term, the prospect of higher prices for imported goods or domestic substitutes gives the field an aggressive Fed policy. The lost assets are risky assets, commodity currencies and emerging markets. The main pain is related to AUD and CAD. In the last case, we could see how Trump's words could hurt yesterday. The US president has made an ultimatum that new duties may not cover Mexico and Canada, but only on condition that the new version of the Nafta agreement will be more "fair" to the US. In any scenario, this is bad news for US neighbors, and therefore their currencies.
Let's now take a look at USD/CAD technical picture at the H4 time frame. The market has broken out above the important technical resistance zone between the levels of 1.2919 - 1.3000 and now is slowly testing the level of 1.2919 from above. The upward momentum remains strong, so the there is still a chance of a further rally towards the next technical resistance at the level of 1.3166.
