USD/CAD Forecast: USMCA sends it below 1.2800, levels to watch

A new NAFTA is born and renamed as USMCA.
The USD/CAD dropped to a four-month low on the relief.
The pair has room to fall, at least until the bottom of the downtrend channel.

Yohay Elam FXStreet

In last-minute late-night talks, Canada and the United States reached an agreement on a new version of the North American Free Trade Agreement. It received a new name: the United States Mexico Canada Agreement (USMCA). Canada agreed to make concessions on opening its dairy market to American farmers while insisting on maintaining the arbitration mechanism, Clause 19. In side letters, the US committed not to slap tariffs on Canada. The northern nation was flabbergasted by the American use of security reasons to impose tariffs on steel and aluminum.

US President Donald Trump and Canadian PM Justin Trudeau hailed the agreement which still needs to be ratified by the legislatures in both countries. Nevertheless, the currency reaction was swift.

The USD/CAD kicked off the week with a significant Sunday gap and dropped below 1.2800, trading at the lowest levels since May, a four-month low. The Mexican Peso rallied as well.

What level should we watch out for?

USD/CAD Technical Analysis

The USD/CAD dropped below the 200-day Simple Moving Average, a meaningful bearish sign. In addition, Momentum is clearly to the downside. At the time of writing, the Relative Strength Index is above 30, thus not representing oversold conditions. All in all, there is room for more drops.

1.2730 is the next level to watch. The pair was supported at or just above these levels throughout the May, thus making it a significant line of support. Further down, 1.2625 capped the pair when it traded on the low ground back in April and when the SMA200 converged with the price.

Lower, 1.250 served as support back in February. Much lower, 1.2250 was the low point in late January and early February.

Looking up, the previous double-bottom of 1.2880 now turns into resistance. It supported the USD/CAD in September and in August. 1.2970 was a support line back in August and now serves as resistance. Above 1.3000, we find 1.3065 as a stubborn level of resistance. The round number of 1.3100 is next.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.