Bank of Canada (BoC) is to announce its interest rate decision later today (14:00, GMT) and is expected to remain on hold at +1.50%. Currently, CAD OIS imply a probability of 80.56%, for the bank to maintain its current level of interest rates. Hence market focus could turn to the accompanying statement, which could cite the GDP growth rate, the inflation rate and unemployment rate in the positive area for its economic outlook. At the same time, a gradual approach for rate hikes could be reiterated and uncertainty in the NAFTA negotiations is destabilising the ground beneath BoC. Overall, we could see a neutral to optimistic tone and if so, CAD could get some support.
USD/CAD continued to trade in a bullish market yesterday breaking the 1.3137 (S1) resistance level, now turned to support and tested continuously the 1.3175 (R1) resistance level. Technically, in order for us, to lift our bullish bias in favour of a sideways movement scenario we would require the pair to break the upward trend-line incepted since the 30th of August. It should also be noted that the RSI indicator remains above the reading of 70, implying an overcrowded long position. Should the market continue to favor long positions for the pair, we could see it breaking the 1.3175 (R1) resistance line and reach or even breach the 1.3210 (R2) resistance zone. Should it come under the market’s selling interest, we could see it breaking the 1.3137 (S1) support line, aiming for the 1.3100 (S2) support level.
The US Dollar continues its rise as trade tensions linger on
USD, strengthened against a number of its counterparts yesterday while correcting somewhat during the Asian session today. According to analysts, the Dollar’s losses were to some degree limited as markets remained largely loyal to safe haven USD ahead of, new trade tensions in the US-Sino relationships. Also, the rise of the ISM Mfg PMI to one of its highest readings for over three years supported the greenback substantially, as it reinforced arguments for the upcoming rate hikes by the Fed. It should be noted that analysts point out towards the emerging markets turmoil and its positive effect on the USD, while others have started to characterise the Dollar as overvalued. Should there be further headlines over trade tensions we could see the USD strengthening further.
EUR/USD dropped during the European session yesterday and corrected upwards during the American and Asian sessions today, effectively remaining above the 1.1575 (S1) support line. The pair may continue to trade in a sideways manner, however, bearish tendencies could be present should the market favour the greenback. Should the Bulls dictate the pair’s direction we could see it breaking the 1.1623 (R1) resistance line and aim for the 1.1675 (R2) resistance hurdle. Should the bears take over, we could see the pair breaking the 1.1575 (S1) support line and aim for the 1.1500 (S2) support barrier.
In today’s economic highlights:
During the European session, we get from the UK the Services PMI for August and from the Eurozone the retail sales growth rate for July. In the American session we get from Canada and the US, their respective trade balance figures for July, while later the US API weekly crude oil inventories figure is due out. As for speakers, ECB’s Peter Praet, St. Louis Fed President James Bullard, New York Fed President John Williams and Minneapolis Fed President Neel Kashkari speak.
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