- The Loonie gave up a lot of ground last week as traders balked at the BoC's surprisingly dovish stance.
- NAFTA renegotiations will be key to the USD/CAD's momentum going forward.
The USD/CAD is sticking to the high notes, trading above 1.2750 in the week's early action.
USD/CAD Forecast: NAFTA nirvana needed after crude cannot help CAD
The Bank of Canada (BoC) turned dovish last week, leaving rates unchanged, and economic data for Canada missed expectations, and US Treasury yields continue to rise, all coming together to drive the Loonie lower and the Greenback higher in the previous week. Following the missed showing for the BoC and inflation, the focus is likely to shift back to the ongoing NAFTA renegotiations between the US, Canada, and Mexico.
Trump's steel tariffs announced in March are slated to come into effect for Canada, who only received a 'temporary exemption' as the hope of future exemptions has been inexplicably tied to renegotiations, and traders are bracing for an unnecessarily messy showdown as the US begins to impose trade tariffs on allies that are currently renegotiating NAFTA.
USD/CAD Levels to watch
As FXStreet's own Yohay Elam noted recently, the USD/CAD is at somewhat of an inflection point and the technical outlook is surprisingly bearish, as he states, "momentum is pointing lower and the pair trades below the 50-day Simple Moving Average. Also, the RSI has still not decisively recaptured the 50 level. On the other hand, the USD/CAD is now above the 200-day SMA. Looking up, the C$1.2764 was a swing high in February and now nearly coincides with the 50-day SMA. Further above, the round number of 1.28 worked as a cushion twice during the month of March. Even higher, 1.2760 separated ranges back when the pair traded at higher ground. On the downside, the swing high of 1.2680 works as weak support. 1.2630 was a stubborn cap in April and now switches roles. The April'low of 1.2525 is next."
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