USD/CAD starts week with strong gains

USD/CAD has posted considerable gains on Monday. In the North American session, the pair is trading at 1.3213, up 0.67% on the day. On the fundamentals front, US New Home Sales slipped to 959 thousand, down from 1.01 million. This reading fell shy of the forecast of 1.025 million. There are no Canadian releases on the schedule. On Tuesday, we’ll get a look at US durable goods orders, as well as consumer confidence.

US PMIs point to expansion

On Friday, the US released PMIs for September, which are important gauges of the services and manufacturing sectors. The Services PMI rose to 56.0, up from 54.6 beforehand. This was the highest level since February 2019. The Manufacturing PMI stayed close to the 53-level for a third straight month, with a reading of 53.3 points. Both readings were above the 50-level, which separates contraction from expansion.

Deadlock over US stimulus deal

Talks continue over the US stimulus package, with the US election just over a week away. Although progress has been made in the talks, the likelihood of a deal between the Democrats and Republicans remains slim. A stimulus agreement would be a coup for President Trump, especially as he faces an uphill election battle against Joe Biden. However, the Republican-controlled Senate appears unwilling to sign onto an agreement, since many Republican senators have their own elections to contend with, and a huge spending package will be anathema to most Republican voters. The financial markets appear to have priced in a no-deal scenario prior to the election, but that doesn’t preclude volatility for the US dollar in the days before the election.

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USD/CAD Technical

• There is support at 1.3165, followed by support at 1.3105
• USD/CAD has broken above resistance at 1.3208. Above, there is resistance at 1.3319
• The pair is putting pressure on the 20-day MA line. If the pair breaks above this line, it would signal an upward trend

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