Judging by the escalating tensions between the US and China, everything is indicating disruption to the trade relations and non-commitment to the trade deal which was made in late 2019. Today media reported that Washington ordered China to close its consulate in Houston, Texas, in a move to ensure safety of the US intellectual property and personal data of Americans. In response, China's foreign office made harsh comments on this decision accusing the US in wrecking relations.

It could be a coincidence, but China's President Xi Jinping came up with some statements before that move. Speaking in front of foreign entrepreneurs, China's leader pledged to reinforce the domestic market avoiding any comments on further relations with the US. Xi Jinping added that he would ensure openness of the Chinese market to overseas investors. Besides, he pointed out that those companies which suffered the most from the pandemic need special attention. This approach will determine directly a pace of economic recovery this year. China is widely expected to make measures to enhance flexibility of fiscal and monetary policies. Remarkably, despite the pandemic-driven crisis, China's GDP grew 3.2% in Q2 from a year ago. At the same time, other countries are revising their relations with China that could close the doors for China to the established sales market. Moreover, the US is tightening its anti-China stance. No wonder, Xi Jinping is seeking other sales markets, thus opening extra advantages and inviting foreign investors to the large-scale domestic market. Such openness is likely to encourage robust and sustainable economic growth.

USD/CAD

Meanwhile, the Canadian dollar is extending strength amid a spike in retail sales and growing oil prices. According to the government data, retail sales surged 18.7% in May from April, amounting to CAD 41.70 billion. Retail sales sharply contracted during the shutdown, so most consumers were poised to slash their spending. However, lifting lockdown measures propelled robust consumer spending. Analysts had projected a bigger jump by 22% for May. Nevertheless, retails sales in Canada remain 20% lower than in February.

Easing a requirement for social distancing and lifting lockdown measures also enabled growth of new home prices. In the latest report, prices edged up 0.1% in June m/m. Besides, new home prices rose 1.3% y/y.

From the technical viewpoint, USD/CAD is set to trade lower amid further weakness of the US dollar. A breakout of support at 1.3430 will trigger massive selling of the pair with downward targets at 1.3350 and 1.3270. The pair is likely to have problems with correction at near resistance of 1.3515 where there is the upper border of the downward channel.

GBP/USD

The pound sterling fell sharply after today's article by The Daily Telegraph, in which the economists expressed concerns that the authorities of the UK and the EU would not be able to nail down a free trade agreement after the United Kingdom exits the EU. The main message is that from January 1, 2021, Britain will begin trade relations with the EU according to the rules of the World Trade Organization. Officials in high circles think the odds are rather high. According to well-formed sources, there is a slim chance that a deal will be actually concluded, but the likelihood remains. The next series of the talks is scheduled for the autumn. So, the EU authorities could make some concessions bearing in mind that both the UK and the US are in the doldrums. A great example is the recent EU summit when the EU leaders reached the last-minute agreement on the recovery fund and the EU budget. On the other hand, a failure to reach a deal will come as no surprise because British Prime Minister Boris Johnson dropped a hint long ago that he was ready for such a scenario.

Now let's discuss the technical picture on GBP/USD. At the moment of writing this article, the pair was testing lows of July 21 despite a sharp growth yesterday. Then, the pair started a correctional climb which proves the bulls' interest in such low prices. A bounce to a high of 1.2725 will signal a further uptrend towards new highs at 1.2770 and 1.2810. In case GBP/USD retreats to lows of July 22, a breakout of support at 1.2645 is sure to push the price down to 1.2670 and 1.2510.