The Canadian economy has been faring pretty well considering global tensions with its 2 biggest export outlets. The Canadian Dollar started rising against the US Dollar in June, when President Donald Trump cancelled tariffs on Canada’s aluminum but met support at 1.30159. Canada is in a tight spot because the United States is its top export partner, ahead of China. Trade relations between Canada and China deteriorated in December of last year (2018) with the arrest of the daughter of Huawei founder Ren Zhengfei, Meng. Following tensions, China closed its ports to Canada’s canola, pork and beef.
Canada’s top 3 export products are:
Mineral fuels including oil (about 22% of total exports)
Vehicles (about 13.4%)
Machinery including computers (about 7.7%)
The latest developments from Saudi Arabia this past Saturday, that we covered in our article yesterday - where 10 drones with explosives destroyed 5% of world’s oil supply, sent the Canadian Dollar up, because Canada is oil export oriented. USD/CAD gapped down, but the gap has now been closed on weaker than expected Manufacturing Sales. The US Dollar rose on better than expected Industrial Production. Besides that, the US 10Y treasuries rose by 35bp since the beginning of September lows (1.46%).
As a result, on a 4HTF, USD/CAD closed the gap and stalled at the 23.6% Fibo level, around 1.32905. The pair still has room for growth; the pair has closed above the Ichimoku Cloud. Strong resistance is at 1.33388, following that 61.8% Fibo at 1.33552. Tomorrow, we have the release of US Interest Rate decision. The FOMC meeting started today and policy makers like dovish St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari are expected to argue in favor of monetary easing while opposition may come from Cleveland Fed President Loretta Mester, who was against the rate cut in July and Philadelphia Fed President Patrick Harker who agreed to the rate cut, though reluctantly and stated he wants “to see how things play out”, a hawkish statement to say the least.
Short position target areas are at 1.32257 (38.2% Fibo), followed by 1.31455 (23.6% Fibo) and then a strong area of support around 1.31066.
Another very interesting pair to look at with the Canadian Dollar is CAD/JPY. 4HTF shows us that the bulls failed 5 times to break a very strong area of resistance and the pair is starting to descend.
Short positions target areas are at 81.408 (23.6% Fibo), then 80.986 (38.2% Fibo, also past support AND resistance). Then we have 80.645 (50% Fibo) and 80.303 (61.8% FIbo).