US-China Trade Agreement Boosts Market Confidence, Adding to Dollar's Rebound
HuaXia Finance APP News — US and Europe reach trade agreement, dollar pressured downward on Monday Asian session, USD/CAD continues its two-day losing streak, trading around 1.3700. This depreciation is mainly due to the important trade agreement between the US and EU, which eases market concerns over global trade tensions, thereby reducing demand for safe-haven assets.
According to market surveys, this agreement will start imposing a 15% tariff on most European exports to the US from August 1st, covering energy, military equipment, and certain manufactured goods. The EU has also pledged to significantly increase imports of related goods from the US. Although the tariff rate is high, the market views it as a result of bilateral concessions, effectively ending the prolonged stalemate.
On the other hand, US-Canada trade talks have stalled. US President Trump recently stated that he does not expect to reach a trade agreement with Canada by August 1st, citing "our negotiations with Canada are not going smoothly, and we may only impose tariffs instead of negotiating." This statement has significantly weakened market confidence in reaching an agreement.
Canada has shown a strong stance. Canadian Prime Minister Trudeau stated in a previous interview that Canada "will not accept unfair agreements" and will not rush to sign a deal at the last minute. The divergence between the two sides has intensified uncertainty over US-Canada trade, supporting the Canadian dollar.
Meanwhile, market rumors suggest that the US may extend its current tariffs on three Asian countries for another three months. Markets are hopeful that talks can stabilize the current situation and boost risk appetite.
Additionally, markets are focused on the Federal Reserve's interest rate decision this week. Broadly expected to maintain the benchmark interest rate at 4.25%-4.50%, the key point is whether the FOMC meeting statement and press conference will hint at future rate cuts.
According to CME FedWatch, market expectations for a September rate cut have reached 62%. If the Federal Reserve hints at starting a loosening cycle, the dollar may face further downward pressure.
From the daily chart perspective, USD/CAD has formed a top structure around 1.3790 after its continuous rebound was blocked. The current price is breaking below the short-term support level of 1.3730 and entering a weak consolidation pattern. MACD's fast and slow lines are crossing downward, with the momentum indicator flipping green; RSI has also broken through the 50 midline, indicating that the current trend is dominated by bears.
If the exchange rate continues to be pressured below 1.3740, short-term support may test 1.3665 (20-day moving average) and 1.3600 whole number level; once it breaks through effectively, the trend may extend to the 1.3535 area; on the other hand, if it can return above 1.3750 or experience a technical rebound.
Editor's opinion:
In the background of the US-China trade agreement easing global trade concerns and US-Canada talks hitting a snag, demand for safe-haven assets has significantly decreased, making it unfavorable for USD/CAD to continue rising. The Canadian dollar has benefited from stabilizing oil prices and emotional recovery.
However, considering that Federal Reserve policy is still unclear, it's best to wait for the FOMC meeting before making any moves. Medium-term trends need to focus on whether the key support level of 1.3600 will be broken; if so, the bearish trend will be further confirmed.