Risk sentiment was buoyed at the start of the new trading week the following news late on Sunday that Canada and the US had reached an eleventh hour deal on NAFTA just shy of the midnight deadline. The trilateral deal between the US, Mexico and Canada has been named the “United States – Mexico – Canada Agreement” replacing the name NAFTA which Trump said now had “bad connotations”.
Joint Statement Praises Deal
In a joint statement released by US Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland, the two leaders said “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”
The deal came on the back of intense final negotiations over the weekend between the three nations aimed at maintaining the 25 year old trade deal. The new deal will allow US farmers wider access to Canadian dairy markets as well as addressing concerns about potential US auto tariffs.
Congress To Review Deal
The deal will now be sent to Congress which will have a 60 day review period, during which time it can suggest changes, before Trump can officially sign off on the deal.
The Trump administration has called the agreement a “big win” for all involved though some have questioned whether the deal agreed is worth the harm is done to US / Canadian relations through the course of negotiations including Trump’s threats to agree a bilateral deal with Mexico, excluding Canada if they failed to meet his demands. However, several key lawmakers said they would not back a deal without Canada and news of the deal has been met with relief by lawmakers and traders alike.
CAD rallied hard in response to news of the deal with USDCAD gapping lower at the open. Price is now below the recent 1.2883 support level, which now becomes resistance. The next key levels to watch to the downside will be the 1.2725 level (50% retracement from 2017 lows) and the rising trend line from 2014 lows with the 1.2504 level in the area also.