The Loonie was supported by a robust crude oil WTI price, a weak US dollar and a strong equity market in yesterday’s trading session. The fact that Trump said he is open to extending the March 1st deadline to raise tariffs on Chinese imports if both sides are close to an agreement by the end of the month was taken positively by market participants. However, nobody knows what will happen; a possible extension with little sign of meaningful progress may now be a disappointment, especially for the close to three-fifths of market participants expecting a narrow deal, according to a Bank of America Merrill Lynch survey. So far, this trade war between China and the US does not bode well for the export cycle, especially for Canadian manufacturers, which has limited visibility for exporters at a time when inventories are high and global demand weak.
Technically speaking, the USD/CAD pair found strong support at the 1.3200 handle in yesterday’s session. However, after testing 1.3196 last night in the Asian trading session, it bounced strongly, along with the US dollar index. The good part for the Loonie bulls is that it has not breached yesterday morning’s 10:30am high of 1.3274. The USD/CAD pair is trading at 1.3246, and it is waiting for the crude oil WTI price to pick a direction amid lack of essential releases for the Canadian economy this week.