Yesterday, the leaders of the USA and Canada expressed optimism in relation to the completion of NAFTA negotiations until Friday. However, USD / CAD after these reports hardly moved. First of all, we only received confirmation of Monday's words of the president of Mexico. Secondly, it is not known in what location Canada is now. Does the bilateral agreement between Mexico and the US do not put pressure on a rapid tripartite agreement, as a result of which Canada will be forced to make bigger concessions than it would originally want? On the other hand, it is unlikely that the US would now play a curled ball and blackmail Canada with harsh conditions. It looks like, it is more likely that Canadian concessions will not outweigh the general decline in uncertainty about the future of trade relations. Eventually, CAD should react positively, but the recent GDP data for the second quarter have made this events unlikely (0.0% versus 0.1% expected, 0.5% prior). This weak reading on the yearly basis (2.4% versus 2.3% expected;2.7% prior) did not shake the market, so no serious speculation regarding the interest rate hike at the September 5 meeting was awakened yet. In recent days, the market has exceeded expectations for October (82% of chances vs. 21% for September), but the combination of the conclusion of NAFTA negotiations and strong data may encourage the Bank of Canada to make an earlier decision.
Let's now take a look at the USD/CAD technical picture after the H4 time frame the data were published. The market retraced 61% of the previous swing down and was capped at the level of 1.3020 so far. Nevertheless, the momentum remains strong and solid, so another spike up is still on the table. The target for bulls is seen at the level of 1.3068 and then at 1.3100. On the other hand, the nearest technical support is seen at the level of 1.3000.
