Canada Markets

CAD Surges as U.S. Trade Uncertainty Disappears

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Canada's spot dollar closed 81 points higher on Monday, reaching its highest level in more than four months. Today's move took out resistance at $.77903 CAD/USD, which could open the door to a move to $.78807. The lower-study shows a less-bearish approach taken by noncommercial traders, who reduced their net-short futures holdings for the first time in four weeks, as of Sept. 25 data. (DTN ProphetX chart)

Canadian dollar investors like what they saw in the NAFTA replacement deal announced on Sunday, called the United States Mexico Canada trade deal or USMCA. Headlines are already pointing to the potential for the Bank of Canada pushing ahead its intended rate hikes now that trade uncertainty has been removed, while avoiding a potential 10% decline in the currency's value being reported last week as a potential outcome should the trade negotiations fail.

The spot Canadian currency formed a bullish gap higher in Monday's trade, ending 81 basis points higher at $.78204 CAD/USD. This is the first move above $.78 cents seen since May 22, or just over four months, while the current rate is nearing a range of three highs on the weekly chart ranging from $.78454 CAD/USD to $.78536 CAD/USD. Today's break above technical resistance at $.77903, the 38.2% retracement of the move from the September 2017 high to the June low could clear the path for a further move to $.78807 CAD/USD, the 50% retracement of the same move.

The lower-study is a histogram that shows the net-position held by non-commercial traders, with this group paring their net-short futures position for the first time in four weeks given the CFTC's data as of Sept. 25. The net-short position, at 19,532 contracts, is the smallest position seen since June 18, or more than three months.

Friday's higher-than-expected GDP data for the month of July, as well as a continued surge in crude oil prices, with NYMEX crude for December delivery reaching its highest level traded since December 2014, point to other supportive factors in the move in the Canadian currency.


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