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USD Price Under Pressure as US, Mexico Agree NAFTA Deal

USD Price Under Pressure as US, Mexico Agree NAFTA Deal

2018-08-28 08:00:00
Martin Essex, MSTA, Analyst and Editor
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USD price, news and analysis:

  • News that the US and Mexico have reached a deal on NAFTA has boosted traders’ risk appetite.
  • With USD seen as a safe haven, the currency has weakened and may continue to drop.

Our trading forecasts for Q3 have been published; you can find the USD guide here.

And check out the IG Client Sentiment data to help you trade profitably.

Downtrend in USD price

Trader optimism has been boosted by news that the US and Mexico have reached a deal to revamp the North American Free Trade Agreement (NAFTA), lessening demand for the safe-haven US Dollar. Looking ahead, that weakness could continue as traders opt for riskier assets such as stocks.

The NAFTA deal has focused attention on Canada to sign up to it and also on the EU to speed up tariff talks, as asked for by the US.

EURUSD Price Chart, Daily Timeframe (June 7 – August 28, 2018)

Latest EURUSD price chart.

Chart by IG

As the EURUSD chart above shows, the pair has been rising steadily since August 15 and is now at its highest level so far this month, knocking on the door of the psychologically important 1.17 level. The S&P 500 and Nasdaq US stock indexes have reached record closing highs and USDCAD has reached its lowest since early June as pressure rises on Canada to strike a NAFTA deal too.

The US/Mexico agreement has outweighed comments by US President Donald Trump that now is “not the right time to talk” to China about the two countries’ trade war and has also boosted the prices of commodities such as US crude oil, which has been rising since hitting a $64/barrel low two weeks ago.

So now the USD downtrend looks set to persist for as long as “risk on” remains the dominant market theme.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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