Canada & US On The Verge Of Finalizing NAFTA Deal

Canada & US On The Verge Of Finalizing NAFTA Deal
October 1, 2018


The Canadian Dollar was pushed back by the US dollar on Friday as the market was skeptical about a possible resolution to the NAFTA issue before the White House imposed a Sunday deadline. Analysts also warned of further potential losses for the Canadian dollar in the weeks ahead. The White House had set an ‘artificial’ deadline that ended yesterday for negotiators to agree on the terms of the future trade relations between the US and Canada.


Canada and US is close to reaching NAFTA deal

The deadline came up because the US officials prefer to have the bilateral agreement signed with Mexico be ratified before Andres Manuel Lopez Obrador takes the oath as the new President of Mexico at the beginning of December. According to US law, there should be a gap of 60-days to review and sign any trade bills. The US administration is afraid that Obrador could refuse certain clauses in the agreement and refuse to sign the new deal.

Obrador has found fault with his predecessor for being generous during the negotiations and promised to take a harder stance toward Trump. Declining to ink the agreement would run the risk of taking the dialogue back to square one while stamping a humiliating setback for the U.S. administration.

The White House plans to update the Mexico bilateral deal so that all mutually agreed details related to the Canada deal are included, and the trilateral agreement is made complete.

Commenting on the US-Canada talks, Karen Reichgott, an economist at Goldman Sachs, said: “If the US-Canada talks fail to conclude by the end of September, amendments can still be made to the draft text—even if originally only a bilateral agreement—up until signing at least 60 days later. Therefore, a trilateral agreement may still be signed by November 30 if the US and Canada are unable to reach a deal within the coming weeks.”

The negotiations took a back seat last Thursday when Trump gave a cold reply to Prime Minister Justin Trudeau’s endeavor to obtain a one-on-one talk at a United Nations summit.

Trump said: “I’ve told him ‘forget about it.’ We’re very unhappy with the negotiations and the negotiating style of Canada. We don’t like their representative very much.”

Mark McCormick, the North American head of FX strategy at Toronto-headquartered TD Securities and the TD Securities team has also pointed out that the trade deficit and prevailing atmosphere for foreign investment demonstrate the course of global capital flows is inclining against the Canadian Dollar.

Analysts have also pointed out that US tax overhaul is diverting foreign currency inflows away from Canada while the nation’s insatiable appetite for investing abroad also shifts the balance of foreign currency flows against the Canadian dollar.

During the past two days, however, things have started moving forward as per the latest Reuters report, which indicates the US and Canadian negotiators could finalize a NAFTA deal as soon as Monday in their effort to avoid a tussle that could put $500 billion in annual trade at risk.

To resolve the pending issues, Canada’s Foreign Minister, Chrystia Freeland, returned to Ottawa while postponing her annual speech at the UN General Assembly.

Both sides continue to engage in telephonic discussion, and according to an unnamed Canadian government source, “the negotiating tone is optimistic and energetic.”

Peter Navarro, Trump’s trade and manufacturing adviser, stated the following to Fox News: “Most of the big issues are solved with Canada,” and it could turn out to be “a great deal for all three countries.”

As a result, fundamentally, the Canadian dollar can turn from bearish to bullish as the day progresses.

Technically, the greenback has hit resistance at 1.3050 levels, and the next support exists only at 1.2920. The Money flow indicator has a reading below 50, and we can, therefore, expect a bearish reversal in the USDCAD pair.

CAD - technical analysis - 1st October 2018

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins

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