USD/CAD price action attempts to base with Trump announces tariffs on Canadian aluminum
The Loonie also looks at risk owing to a scheduled release of monthly jobs data due Friday
The Canadian Dollar, or Loonie, drifts into the hot seat as US President Trump hints at imposing a 10% tariff on aluminum imports from Canada. As one might expect, the news is weighing positively on USD/CAD price action with the major currency pair trading more than 50-pips above intraday lows driven by an influx of Canadian Dollar selling pressure.
USD/CAD PRICE CHART: 2-HOUR TIME FRAME (27 JULY TO 06 AUGUST 2020)Recent USD/CAD buying looks to have developed an intermittent base around the 1.3250-price level as the Greenback advances and prints a string of higher lows. This area of technical support could serve as a potential demand zone for USD/CAD going forward, and the Canadian Dollar could face additional selling if the 10% duty on aluminum levied by President Trump prompts Prime Minister Trudeau to escalate matters into a tit-for-tat tariff spat.
USD/CAD of clients are net long.
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These developments follow the new USMCA trade deal ratified earlier this year that just went into effect this past July. President Trump, or the ‘tariff man’ as some say, stated that Canadian producers of industrial metals have broken commitments to curb aluminum exports into the United States. The Canadian aluminum industry contributes nearly $5-billion to annual GDP, and approximately 75% of production is exported to the United States.
USD/CAD PRICE CHART: DAILY TIME FRAME (DECEMBER 2019 TO AUGUST 2020)
USD/CAD price action could face an uphill battle, however, and may keep bullish bets at bay. This is particularly in consideration of widespread US Dollar weakness endured over the last several weeks that has pressured the DXY Index to a two-year low. Yet, Canadian Dollar bears might make a push here with USD/CAD searching for support around February lows.
Perhaps the 1.3350-price zone, which roughly aligns with the 8-day moving average, the 76.4% Fibonacci retracement of the currency pair’s year-to-date trading range, and not to mention last month’s swing low, could serve as a potential topside objective for USD/CAD bulls before a broader trend reversal comes into consideration.
That said, potential for Dollar volatility looks quite elevated due in large part to expected uncertainty surrounding the release of high-impact employment reports from both Canada and the US. According to the DailyFX Economic Calendar, jobs data is scheduled to cross market wires Friday, August 07 at 12:30 GMT, and thus leaves USD/CAD price action at risk. Likewise, the direction of crude oil prices, which typically maintains a strong positive correlation with the Canadian Dollar, could weigh materially on USD/CAD as well.
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