The trade agreement reached between the U.S. and Mexico made the headlines on Monday. The news sent the S&P 500, the Nasdaq, and the Russell 2000 to new record highs. The Dow Jones Industrial average broke above 26,000 for the first time since February and is currently 567 points away from its January record high.

The U.S. – Mexico deal seemed to boost confidence that the trade war is moving closer to an end, and the next question is who’s next to close a deal with Trump? Global trade tensions have undoubtedly been the most significant source of risk in 2018. It led to massive falls in emerging market currencies and sent Chinese equities into a bear market after $2 trillion were wiped off their value.

Although investors finally see the light at the end of the dark tunnel, when it comes to China the tunnel may prove to be too long with lots of bumps along the way. However, it's Canada what investors will be watching next.

The dollar which gave up 2.3% from its 14-months high will continue to retreat lower if Canada manages to secure a similar deal this week.But if negotiations fail there’s a high chance that traders return to king dollar, and the surge in risk appetite will be short-lived.

Although most Asian stocks traded higher following Monday’s Wall Street performance, mainland China stocks fell back into red territory with Shanghai composite and Shenzhen indices retreating slightly. This suggests that neither the U.S. – Mexican deal nor PBOC’s efforts to put a floor on the CNY managed to attract investors. The latest announcement by China’s central bank to reintroduce a “counter cyclical factor” to determine the renminbi’s exchange rate is aimed to stabilize the currency after it fell for nine straight weeks since mid-June. However, with the economy continuing to gradually slow, government pushing for deleveraging, and ongoing trade tensions with the U.S., it's more likely to see a weaker currency longer term. That’s probably why the PBOC’s move was not enough to encourage investors to buy risk assets.

The economic calendar is relatively light today, so expect currency traders to continue taking the cue from equities performance and any update on U.S. trade negotiations with Canada.

Disclaimer:This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

When are the UK data releases and how could they affect GBP/USD?

GBP/USD stays pressured around 1.2550 after flashing the biggest losses in two weeks the previous day. The British economic calendar will entertain the global traders amid recently sluggish markets at 06:00 GMT with the GDP figures for May.


EUR/USD looks north but risk aversion could play spoilsport

EUR/USD looks north with the German economy showing signs of bottoming out and heightened expectations for an EU fiscal stimulus plan. Stronger gains, however, may remain elusive if the stock markets drop, tracking losses on Wall Street. 


Gold: Breaks $1,800 threshold, nearby support lines in focus

Gold prices extend Monday’s pullback from $1,813.54 to challenge Friday’s low. Monthly support line, a five-week-old rising trend line to question the bears. Bulls will seek entries beyond the weekly resistance line.

Gold News

US Consumer Price Index June Preview: Prices slowly return to normal

Consumer prices that collapsed in March and April have begun to return to normal as people return to work and shopping, and the country puts the complete lockdowns of the spring behind it.

Read more

WTI: Bears firming up the grip towards immediate support lines under $40.00

WTI stays on the back foot after taking a U-turn from $40.87 the previous day. An ascending trend line from June 25, monthly support line are on the sellers’ radars. A three-week-old falling trend line restricts the pair’s immediate upside.

Oil News

Forex Majors