USD/CAD flirts with 2018 tops near 1.2940

• CAD depreciates to fresh YTD lows vs. the greenback.
• NAFTA concerns, US tariffs weighing on the Canadian Dollar.
• US ISM Non-manufacturing next on tap. BoC meeting on Wednesday.

The Canadian Dollar is extending the selling bias vs. its American counterpart at the beginning of the week and is pushing USD/CAD to the vicinity of 1.2940, levels last traded in October 2017.

USD/CAD higher on NAFTA worries

CAD saw intensified its selling bias following increasing concerns over the NAFTA negotiations, particularly after President Trump has once again deemed it as ‘a bad deal for USA’. Trump also conditioned the removal of recent tariffs on steel and aluminum to a ‘new and fair’ NAFTA. It is worth recalling that the US is the main destination of Canadian steel and aluminum.

In addition, recent softer-than-expected Canadian GDP figures for the October-December period (Friday) have been also weighing down on CAD.

In the meantime, spot has reached the 50% Fibo retracement of the 2017 drop (1.2927), advancing in 5 out of the last 6 weeks and gaining nearly 6% since 2018 lows in the 1.2240 region seen in early February.

On the positioning front, speculative CAD longs reached fresh 2-week tops in the week to February 27 in light of the latest CFTC report.

Looking ahead, the Bank of Canada will meet on Wednesday and is expected to keep rates on hold and also deliver a somewhat dovish message. In the US, today’s ISM Non-manufacturing is next on tap ahead of the speech by FOMC‘s R.Quarles.

USD/CAD significant levels

As of writing the index is gaining 0.40% at 1.2933 facing the initial hurdle at 1.3016 (high Jul.5 2017) followed by 1.3132 (61.8% Fibo of the 2017 drop) and finally 1.3349 (high Jun.21 2017). On the other hand, a breakdown of 1.2763 (10-day sma) would open the door to 1.2755 (38.2% Fibo of the 2017 drop) and then 1.2683 (200-day sma).