Trade War Worries BGP and USD/CAD Rises
The USD/CAD pair is on the rise, the currency pair is trading near the mid-1.4000 level as of today. Recent increase is attributed to such factors as strengthening of the U.S. dollar momentum and increasing trade war concerns between the U.S. and some of its counterparts. Being that Canada has relatively sound economic strength the pressures are rising significantly on the loonie.
This article discusses scalpel, fundamental, and technical drivers of USD/CAD move to help the trader understand what the move could be in the next steps.
The U.S. Dollar: Merger Wave or Value Fund On Steroids Rally?
This is on the back of an improving US economy and a fairly aggressive Federal Reserve policy. Employment data for November was positive, GDP remained healthy and consumer spending did not slump further, all of sustaining America’s terminal high-interest rates.
These factors have offered basic support to the dollar, which seems to help to bury the problem of trade conflicts. As per FXStreet, there is scope for an extend of dollar strength in the short term and hence USD/CAD can remain underpinned beyond 1.4000 level.
Western Globalization Persists to Poses External Pressure on the Canadian Dollar
Despite appearances suggesting that the Canadian economy is quite healthy at home, the dollar is receiving external pressure. Another uncertainty affecting the Canadian dollar is advance in trade tensions. Warnings of possible U.S. trade measures have shaken markets and people are wondering how Canada might be affected – its neighbor and a major trading partner.
Furthermore, decline in oil price – another significant factor that influences Canada which pride itself in it resource base – has also exerted more pressure. As the WTI crude oil price remains below the recent highs the Canadian dollar is testing markets correlated to energy.
Technical Analysis: USD/CAD in Focus
As far as technical analysis is concerned, this USD/CAD has met the objective set out by Economies.com to build a consolidation above the current key support of 1.4000. This level plays a very special role for traders looking for either a continuation of the trend or a reversal to the downside.
Main pushback identified in the rate is at 1.4500, with a breach of encouraging a further increase in the rate. RSI indicators reflect the pair’s moderately bullish positioning however, it still exploits a middle to upper territory, thereby allowing for further rate hikes within a fundamentally favorable landscape.
ActionForex analysts explain that the 1.4200 level is crucial for the determination of an upward movement. Anything below this level could invite more selling activities, although the current tone is bullish.
Geopolitical Risks Contribute to the Standard Deviation
Apart from fundamentals relating to technology and economics, geopolitical factors are unpredictable USD/CAD. New comments by American officials of implementing tariffs on major partners have again revived the trade war debate. These concerns are particularly so for Canada given this comprehensive economic partnership with the U.S.
However, due to the current uncertain market conditions in regard to these advancements, the risk sentiment is expected to help shape USD/CAD direction in the future. If the tensions that exist in the trades rise to another level, then the two may experience a volatility in the next one or two weeks.