Near NAFTA


It is twilight here in the GMT -05 timezone and as electronic venues begin to warm-up and post bids and offers the Cad$ is looking stronger at an indication of $1.2850 vs Friday NY close of $1.2910. Intraday Friday the CAD surged from over $1.3020 to the $1.2900 region.

Canada did report a slight GDP beat on Friday. I believe the October BOC rate hike was already a fait accompli no matter the Friday data (mkt pricing assumes it as well). But there were hints in recent speeches (Wilkins in Ottowa several weeks back) that their future rate path may not be as steep as that of the Fed's.

Trump on trade I believe will prove to have more bark than bite as US midterms near. China domestic slowdown fears will not be as bad as perhaps feared I sense.

I like a long USD/CAD at $1.2850 even with an agreed upon tri-lateral NA trade deal as I think new terms will still put a dent in any further Cad$ appreciation. I would expect a $1.29 handle could be regained on even positve NAFTA outcomes.

And of course any further negative announcements (delays) would most likely see a sharp USD surge higher versus Cad and Mex.
AUD/USD at $0.7220 seems like a good long entry if indeed CAD retains this bull run. Same with NZD/USD from the .6620 area. Their domestic data seems to be coming in better than expectations, coupled with a fairly dovish RBNZ and market short positioning.
Back to the price action in USD/CAD on Friday it was clear that certain market participants knew something was brewing as the cross rate plummeted amidst dollar strength elsewhere (not to mention month and quarter-end flows can make even the most eager contrarian trader of thinking twice or thrice before stepping in front of any move - no matter how seemingly exaggerated).