USD/CAD Forecast: Topping 1.3000 On Trump, Canadian Homes And Kudlow, Is it Overbought?

• The USD/CAD stormed above the C$1.3000 it had previously struggled to break.
• A tweet by Trump about Canada and two more issues are behind the move.
• After reaching the highest since June 2017, the pair is nearing overbought territory.

The USD/CAD is trading above C$1.3000 and reached a high of 1.3043, the highest level since late June 2017, a new 8-month high. There were two immediate reasons for the rise.

1) Trump Tweet: First, a tweet by US President Donald Trump. He insisted that Canada has a trade surplus with the US, adding fuel to the fire amid the dragging NAFTA negotiations and the trade tariffs. Canada was given an exemption from the 25 percent tariffs on steel that the US imposed but the US linked the exception to a successful renegotiation of the trade agreement. The Canadian economy heavily relies on trade with the US and especially on steel. See more on trade wars.

2) Canadian Existing Home Sales: a second consecutive fall in Canadian Existing Home Sales. These dropped by 6.5 percent in February adding to a plunge of 14.5 percent in January. Worries about Canadian housing have been going on for a while with curbs on purchases both in Toronto and beforehand in Vancouver. The Home Sales figure exacerbates the sense of crisis.

3) Kudlow doesn't like Trudeau: In the US, Trump nominated Larry Kudlow, a commentator and a free-trade advocate that worked in the Reagan Administration as Chief Economic Adviser. However, Kudlow criticized China's practices, placing himself closer to Trump's views. Moreover, Kudlow criticized Canadian Prime Minister Justin Trudeau in the past, calling him a "crazy lefty." Nominating Kudlow is therefore not the most positive development for the Canadian Dollar.

Earlier this week, Bank of Canada Governor Stephen Poloz said that the economy has room to grow without creating further inflation, pushing the loonie lower and sending the USD/CAD close to the round level. These three developments threw it over the top.

USD/CAD Technical Analysis - Nearing Overbought Territory

While Momentum is healthy, the RSI on the daily chart is nearing the 70 level once again, indicating the pair may soon run out of steam. The pair remains above the 50-day and 200-day Simple Moving Averages. 

The break above 1.3000 is significant: it is not only a round, psychological level but also a stubborn resistance line last week. Immediate resistance awaits at $1.3080, the 100 percent extension of the move from the 1.2920 triple top to 1.3000. The next line is 1.3180 that supported the pair last year. Even higher, 1.3320 capped the pair around that time.

Looking down, 1.3000 switches to support and the former triple-top of 1.2920 is next. The 1.2810 sustained the pair after it was rejected from 1.3000 late last week.