USD/CAD drops to test September lows below 1.3000
|- Loonie gains versus US dollar amid NAFTA talks, higher crude oil prices and Canadian data.
- Higher US yields supports DXY but still greenback heads to the lowest close since August 30 against CAD.
The USD/CAD pair dropped further during the US session and bottomed at 1.2973, the lowest since August 31 but still remains unable to make a clear break of the 1.2975/80 area. As of writing, it was trading around 1.2980/85, holding a bearish tone and testing a very strong support.
The Loonie was among the top performers and remains near daily highs versus the US dollar despite some strength of the greenback. While the US Dollar gained momentum across the board on the back of higher US yield, CAD received support from Canadian data and higher crude oil prices. Oil futures were higher on Tuesday, the WTI barrel eased from highs but was still up more than 1%.
Today’s data showed that nominal manufacturing sales in Canada rose 0.9% in July. “Concerns about potential trade disruptions with the US remain but, for now, the Canadian manufacturing sector seems to be doing a little better”, wrote analyst from RBC. They added that absence a more fundamental shock to the economy, the broader underlying economic backdrop still looks firm and strong enough to warrant further gradual Bank of Canada interest rate hikes.
Trade negotiations between the US and Canada continue an there is some uncertainty about the outcome. The new tariffs announcement from the US and China had no impact on the USD/CAD. The pair rose overnight but then pulled back, earasing all gains.
USD/CAD Levels to watch
The pair is testing the key support at 1.2975, a break lower would open the doors for a slide to 1.2950/60, under that level the next support might lie at 1.2935. On the upside, resistance levels could be seen at 1.3010, 1.3035 and 1.3065 (Sep 18 high).
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