Canadian dollar soars as Mexico rejects US version of USMCA
The US dollar declined sharply against the Canadian dollar as resistance emerged over the new USMCA deal. The resistance came from Mexico, which angrily resisted the new bill that will be debated in US congress this week. This was revealed as Jesus Seade, the country’s chief negotiator travelled to Washington on Sunday to discuss these issues. Seade said that the new bill contained provisions that Mexico had not agreed to. For example, he said that the country resisted the provision of having up to five US labour attaches in Mexico to monitor adherence to labour rules. Instead, Mexico has pushed for panels – instead of these inspectors – to resolve disputes. This means that the deal could be delayed.
The euro struggled for direction as the market reacted to the new data from Europe. Markit, the global data company, released the flash PMI data from the EU. These numbers showed that the manufacturing sector had weakened in November. In Germany, flash manufacturing PMI declined from 44.1 to 43.4 while the composite PMI remained unchanged at 49.4. In the European Union, the manufacturing PMI declined to 45.9 to 46.9. This was below the consensus estimates of 47.3. In the UK, the manufacturing PMI declined to 47.4 from the previous 48.9 while the services PMI declined from 49.3 to 49.0. However, traders are optimistic that the new UK government will lead to a smoother Brexit.
Global stocks were mixed today as the market started to digest the new truce between the US and China. In Asia, the Hang Seng and China A50 dropped by 180 and 35 points respectively. In Europe, the DAX, CAC, and FTSE rose by 83, 60, and 161 points respectively. In the United States, all futures pointed to a higher open. This came as China and the US announced the first phase of a deal. Robert Lighthizer said that China had agreed to buy $16 billion more agricultural goods in the next two years. Other details of the deal remained vague and traders are worried about the impact of the deal.
The EUR/USD pair rose slightly even after the disappointing PMI data. The pair is trading at 1.1140, which is higher than Friday’s high of 1.1110. The price is slightly above the 14-day and 28-day moving averages and slightly above the important support shown in pink below. The price also appears to be forming a symmetrical triangle pattern, which means that a breakout in either direction may happen in the next few days.
The USD/CAD pair declined sharply today. The pair reached a low of 1.3125, which is the lowest level since November 4. The price is along the lower line of the Bollinger Band and below the 14-day and 28-day moving averages. The RSI has moved to the oversold level of 30 while the signal line of the MACD indicator remained below the neutral level. The price may continue to drop as the market continues to watch the ongoing issues on trade.
The GBP/JPY pair was relatively unchanged today as the market continued to digest Boris Johnson’s election. The pair is trading at 146.40, which is below Friday’s high of 147.92. The price is slightly above the 14-day and 28-day moving averages. The average true range has continued to soar while the momentum indicator remains above 100. The pair may move lower to fill the gap that was formed on Friday in the coming days.