The USD/CAD pair was closed at 1.33502 after placing a high of 1.33947 and a low of 1.33337. Overall the movement of the USD/CAD pair remained bearish throughout the day. Despite broad-based US dollar strength, the pair USD/CAD stayed below 1.3400 level on Monday amid the rising crude oil prices and the news of aluminum tariffs.
The US Dollar was rising on Monday following the better than expected employment data of Friday. However, the gains in the US dollar were short-lived as many factors, including US-China relations and the Democrats willing to compromise, limited the rising US dollar demand.
The US-China relations were affected by the crossing of a Chinese jet, a median of the Taiwan Strait line in response to the visit of US Health Secretary in Taiwan. The tensions in Taiwan have developed since the Hong Kong clash between the US & China, and it has raised fears for a direct confrontation of the two largest economies.
China's move came in retaliation for the sanctions imposed by the US over Chinese and Hong Kong officials. The increased fears of escalated tensions between the US & China put pressure on the US dollar, and the prices of USD/CAD moved in a downward direction.
The Democrats have shown a readiness to settle on the $3 trillion packages, and it has raised hopes for a quick announcement of the next US stimulus package that also weighed on US dollar and USD/CAD prices on Monday. Meanwhile, the crude oil prices remained higher on Monday above the $42.2 per barrel and supported commodity-linked currency Loonie. The improved risk-on market sentiment supported the crude oil prices after the news came regarding the video conference meeting of US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with Vice-Premier Liu He on August 12 to evaluate the implementation of the phase-one trade deal.
Moreover, the risk sentiment was also backed by the statement of WHO Chief Scientist, Dr. Soumya Swaminathan, who said that 200 vaccines were under progress across the globe, out of which 24 were in human trials. That gave hope that a possible effective vaccine is near and raised the risk sentiment.
The increasing Crude oil prices helped commodity-linked Loonie to gain traction, and that weighed on USD/CAD pair on Monday. Furthermore, the CAD pair was also under pressure after Canada announced a C$ 3.6 Billion tariff on US aluminum products. Canada's move came in after a day US President Donald Trump imposed a 10% tariff on some Canadian aluminum products.
Both countries seized a settlement last year to lift tariffs on steel and aluminum imports that were imposed on the ground of national security. And on Thursday, Mr. Trump reintroduced them to protect the US industry while on Friday, Canada also announced retaliatory tariffs that will go into effect on September 16. A dollar-for-dollar fight leads to the declining USD/CAD pair on Monday.
Meanwhile, nearly dozens of European airline executives sent a joint letter to Canada's Prime Minister Justin Trudeau, urging him and his cabinet's ministers to lift the travel restrictions that were imposed due to coronavirus pandemic to restore safe-international travel.
Daily technical Levels
Pivot point: 1.3359
The USD/CAD is taking a sharp bearish turn, falling from 1.3360 level to 1.3315 level. On the lower side, the USD/CAD pair is likely to drop until the next support area of 1.3290 level. Most of the selling is triggered due to a downward trendline, which extended it a solid resistance at 1.3397 level. Recently the USD/CAD pair has crossed below 50 EMA, suggesting further odds of selling until 1.3292 level. Let's consider taking sell trades below 1.3340 level today. Good luck!