USD/CAD stays positive beyond 200-day SMA ahead of US/Canada PMIs

• USD/CAD again aims for a three-month-old falling resistance line.
• Upbeat China data, WTI recovery fails to impress Loonie buyers as doubts over US-China deal looms.

USD/CAD takes the bids to 1.3295 during a pre-European session on Monday. The pair seem to ignore the latest recovery in oil prices and China data while concentrating on the uncertainty surrounding the US-China trade deal.

While recent Purchasing Managers’ Index (PMI) numbers from China have been broadly favoring the commodity-linked currencies, the Canadian dollar (CAD) is likely lagged behind in that sense. If we look at prices of Canada’s largest export item, Crude Oil, they are also improving and don’t approve the recent recovery.

Though, a closer look at the recent headlines from Axios and China’s Global Times seems to provide the reason. Odds of a phase-one trade deal between the United States (US) and China, which were previously very high, seem to decline as both sides are stuck on key issues concerning the US tariff rollback, China’s agricultural demand and Hong Kong Act.

Even so, the US 10-year treasury yields gain more than three basis points (bps) to 1.81% whereas stocks in Asia, as indicated by the MSCI index of Asia Pacific shares outside Japan, also stay positive.

November month activity numbers from the US and Canada are likely to act as immediate catalysts. While readings from the Markit signal an improvement in Canadian number to 52.6 from 51.2, the US PMI isn’t expected to change from 52.2. Further, the US ISM Manufacturing PMI, closely watched for its contribution to the US Gross Domestic Product (GDP) forecast, may recover to 49.4 versus 48.3.

Technical Analysis

A downward sloping trend line since September 03, at 1.3300, will keep buyers away while 200-day Simple Moving Average (SMA) level of 1.3280 and a five-week-old rising trend line near 1.3220 will challenge sellers.