Daily Analysis | 24 January 2018
The sixth round of the NAFTA negotiations resumed yesterday in Montreal. There were some good signs upon the restart as US president Trump said that talks were doing “pretty well”, however, he also reiterated his opinion that “if it doesn’t work out, we’ll terminate it”. Media reports suggest that Mexico and Canada are prepared to be flexible in some hot issues like, that the amount of North-American produced content in North American cars should be boosted, however, oppose the idea of it being the US made. Also, differences remain on US demand for changes in resolving various disputes. The unofficial deadline should be the end of March as Mexican elections approach but we see the case for them to linger on as the complexity of the issues increases. We also see the case for any progress in the NAFTA negotiations to strengthen both USD as well as CAD as we see a win-win situation in a possible positive result of the NAFTA negotiations. The USD/CAD traded in a rather sideways manner in the past ten days, remaining near the 1.2450 (R1) resistance line. We expect the pair to continue to trade in a sideways manner over the short term, however we would like to point out that the pair could be quite sensitive to any further news regarding the NAFTA negotiations, oil prices and any other financial releases, especially on the CAD side as for example the Retail sales on Thursday and the CPI rate on Friday. Should the pair come under buying interest we could see it breaking the 1.2450 (R1) resistance line and also breaching the 1.2520 (R2) resistance zone. On the other hand, should the pair come under selling interest we could see it breaking the 1.2350 (S1) support line and aim for the 1.2250 (S2) support level.
- Support: 1.2450(S1), 1.2520(S2), 1.2593(S3)
- Resistance: 1.2350(R1), 1.2250(R2), 1.2100(R3)
Davos meeting kicked off yesterday
The Davos meeting kicked off yesterday and will last until the 28th of January. The Davos meeting is attended by the elite of the world business leaders and political figures are also invited as guests. The US President will be visiting the meeting for the first time since the Clinton administration. Main themes of discussion as well as emerging trends, of the meeting are until now the following: A possible trend in the US of protectionism. Examples of such trends could be yesterday’s tariffs imposed by the US. There are worries about a possible crisis ahead as current global economic conditions seem to resemble 2006. The US tax law got good comments and is expected to increase jobs and boost growth. Eurozone was characterised as a success story and confidence for the Eurozone was boosted. There seems to be a weakness in Western leadership as it seems to be replaced by emerging economic powers such as China and India in a bit by bit modus. The meeting as such does not affect the course of any particular currency, however, provides a valuable insight into the world’s economic outlook.
Today’s other economic highlights would include:
A number of PMI’s for Germany and the Eurozone for January are to be released and are all forecasted to drop somewhat. Such an aggregated effect may adversely influence the EUR. The EUR/USD as forecasted in yesterday’s analysis, traded in a rather sideways manner with a bullish tone, however, it did not break the 1.2355 (R1) resistance line. We expect the pair to continue to trade in a sideways manner, however this time with a more bearish tone, reflecting the weak financial data mentioned before. Should the bears take full charge of the pair, we could see it breaking the 1.2230(S1) support line and aim for the 1.2100(S2) support barrier. Should the bulls take the driver’s seat we expect the pair to break the 1.2355 (R1) resistance level and aim for the 1.2495 (R2) resistance hurdle. On other news, we expect the release of UK’s employment data for November, from the US the weekly US crude oil inventories and last but least New Zealand’s CPI rate for quarter 4.
- Support: 1.2230(S1), 1.2100(S2), 1.2000(S3)
- Resistance: 1.2355(R1), 1.2495(R2), 1.2600(R3)
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