USD/CAD drops on NAFTA news, eyes 1.30

• US drops contentious auto-content proposal in NAFTA talks.
• CAD picks up a bid, USD/CAD drops 50 pips.
• Technicals indicate scope for a drop to 1.30.

The Canadian dollar inched higher against the greenback, taking the USD/CAD down to 1.3021 on reports the US has dropped the contentious auto-content proposal in NAFTA talks.

Washington had originally demanded both the 50 percent US content requirement and jacking up an existing requirement for North American content from 62.5 percent to 85 percent. However, US' decision to drop the proposal has cleared the way for a new North American Free Trade Agreement (NAFTA).

Consequently, the bid tone around the CAD has strengthened. As of writing, the pair is trading at 1.3027 levels. The bearish price-RSI divergence seen on the daily chart indicates scope for a drop below the psychological support of 1.30.

Ahead in the day, the CAD will likely remain well bid on NAFTA news. That said, the pair may reverse course if the Fed revises higher its 2019/20 interest rate dot plot.

USD/CAD Technical Levels

A break below 1.30 (psychological support) would expose the ascending 10-day MA positioned at 1.2978, under which a major support is seen at 1.2921 (March 14 low). On the higher side, a move above 1.3059 (50-hour MA) would allow re-test of 1.3103 (March 20 high) and 1.3125 (March 19 high).