Loonie Gains on NAFTA, Euro Down on Italy

CAD Stays Strong After US and Canada Agree on NAFTA

The US dollar traded higher or unchanged against the other G10 currencies on Monday. It gained versus SEK, CHF and EUR, while it underperformed against CAD and AUD. The greenback traded virtually unchanged against GBP, JPY, NZD and NOK.

USD/CAD — Technical Outlook

After the Canadian dollar started picking up strength in the second half of last week, we saw a heavy slide south in USD/CAD, where buyers kept getting crushed even going into this Monday. Yesterday, the bears managed to overcome the key support zone of 1.2885, a move that confirmed a forthcoming lower low, and turned the near-term outlook to more bearish. However, at the moment, we are seeing a bit of consolidation on the 4-hour chart that could potentially lead to a bit of retracement to the upside, before entering the second leg of selling.

Euro Stays Down on Italy, Pound Spikes on Brexit Headlines

The euro traded lower against most of its G10 peers yesterday. It gained only against SEK, while it traded virtually unchanged against CHF. The main gainers were CAD, AUD and GBP in that order.

EUR/GBP — Technical Outlook

The euro continues to underperform against the British pound. This is clearly shown on the EUR/GBP chart, where the pair managed to wipe out all the gains it made during the strong bullish move that we saw on the 21stof September. Also, yesterday, EUR/GBP closed below the medium-term upside support line drawn from the low of 17thof April. Certainly, this does add a negative spin on the near-term outlook, but to consider further declines, the pair has to break a key support zone, which will be discussed below. For now, we remain cautiously bearish and wait for a confirmation break.

As for the Rest of Today’s Events

Besides the UK Conservative Party Conference, the economic agenda appears relatively light today. The only release worth mentioning is the UK construction PMI for September, which is expected to have declined to 52.5 from 52.9. On Monday, the manufacturing index rose to 53.8 from 53.0, beating expectations of a slide to 52.6, but the pound remained indifferent at the time of the release. We believe that investors are likely to focus more on the services PMI, due out on Wednesday, in order to get a clearer picture on how the economy may have performed during the last month of Q3, as the service sector accounts for around 80% of the UK GDP.



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