• The US decided to scrap one of the most contentious demand in NAFTA talks
  • NZ dollar continues trading on the back foot following weak second-tier data
  • US stocks recover after the gloomy start to the trading week

After a successful session on Tuesday the US dollar is giving back a part of its gains in the morning while the Canadian dollar is the best currency among its major peers. The prime reason are revelations coming from NAFTA talks that some progress has been made. It concerns the most contentious and protectionist demand which the US chose to drop paving the way for a new North American Free Trade Agreement. According to the Canada’s Globe and Mail the Trump administration scrapped a demand that all vehicles made either in Canada or Mexico for export to the US need to contain at least 50% of US content. It’s been one of the toughest demand and a key roadblock to make a new trade deal between three countries. As a result, both the CAD and the MXN benefit from those reports with the former gaining 0.4% and the latter being up as much as 0.75%. Having said that, Loonie traders cannot be already so joyous due to a technical landscape being not so in favour of them.

link do file download linkThe USDCAD made a major breakout last week, and therefore any swings to the downside could be contained until the price stays above its crucial support line at 1.30. This level needs to be dealt with if bears want to reverse the latest impressive increase. If they do that, the pair may decline even toward 1.2660 where another pivotal technical level is placed. Source: xStation5

The sole currency being down against the greenback in the morning is the NZ dollar which was offered the weakish migration data. The NZ economy witnessed its lowest monthly immigration inflow since February 2015 (4,970) which could have an impact on economic growth as well as house prices. The less people coming in New Zealand the less upward pressure on house prices, and at the same time some downside risks to economic growth via not so quickly building labour supply. On top of this, there was a fortnightly milk auction yesterday where whole milk powder average price falls to $3,326 per ton which could have been added some downside pressure on the kiwi alike. On the other hand, Fonterra being the largest dairy player in New Zealand, lifted its milk price forecast for 2017/2018 by 0.15 NZD per kilogram to 6.55 NZD. Together with a dividend ranging from 25 to 35 cents it is going to be the highest total payout to farmers in almost a decade (to be honest the third highest one).

link do file download linkThe NZ dollar slipped below its relevant support area, hence one may suspect that the pair could struggle to come back above this level barring some disappointments from the Federal Reserve meeting later today. Source: xStation5

At the end of the morning analysis let’s sum up the US session which brought a dose of reprieve yesterday but not so much to be honest. The SP500 (US500) closed 0.15% higher, the NASDAQ (US100) added all but 0.5% while the Dow Jones (US30) gained 0.3% despite the back-to-back decline on Facebook shares (it was down 2.6%). In Asia moods got sour at the end of trading and as a result both the Japanese NIKKEI (JAP225) and the two major Chinese indices saw decreases.