Easygoing Wednesday ahead

The greenback edged a bit lower yesterday against its counterparts, yet overall volatility was at low levels. On the monetary front, we note that Fed Chairman Powell yesterday mentioned that inflationary pressures in the US economy seem to be easing yet interest rates are likely to rise further. He also noted that “The disinflationary process has begun,” yet that it may take “not just this year but next year to get down to 2%,” which highlights the bank’s intentions not only to raise interest rates at high levels, but to also keep them there for a prolonged period. Furthermore, he also noted that the resilience of the US employment market, tends to highlight the possibility of the inflation fight taking a considerable time. Overall today, given the low number of high-impact financial releases, we expect fundamentals to be the key driver regarding the market sentiment direction and comments made by Fed policymakers may get additional attention. US stock markets on the other hand, were on the rise given that all three major stock market indexes, namely the Dow Jones, Nasdaq and S&P 500 ended their day in the greens and some optimism seems to be characterizing market participants. Today we note the release of the earnings reports of Disney and Uber which could generate some headlines regarding US stock markets. North of the US border the CAD strengthened against the USD, as the trade deficit which was expected to widen, did but not as much as the market expected easing somewhat market worries for the effect of Canada’s international trading activities on the economy. Oil prices were on the rise with traders encouraged by expectations for increased demand from China, which could allow oil prices to rise even further, reflecting the positive effect also on the CAD, given that Canada is a major oil-producing country. Also, the drawdown reported by API in its report about US oil inventories for the past week may have provided also some support for oil prices give the slack noted in the US oil market over the past few weeks. On the monetary front the Loonie may have found additional support as BoC Governor Tiff Macklem made some hawkish comments, as he was reported stating that the bank is prepared to raise its policy rate further, he also seemed to be quite confident that the bank is not to cut rates anytime soon and that tends to showcase the bank’s hawkishness as well.

USD/JPY dropped yesterday, breaking the 131.40 (R1) support line, now turned to support. Given also that the RSI indicator is running along the reading of 50, implying a rather indecisive market, we tend to maintain a bias for a sideways motion. Should a selling interest be expressed by the market, we may see the pair breaking the 128.60 (S1) support line, paving the way for the 126.40 (S2) level. Should the pair find fresh buying orders along its path we may see it breaking the 131.40 (R1) resistance line, aiming for the 134.80 (R2) resistance level.

USD/CAD edged lower yesterday, yet the overall sideways motion between the 1.3465 (R1) and the 1.3335 (S1) levels, seems to be maintained. We intend to keep our bias for the rangebound movement to continue, given also that the RSI indicator remains near the reading of 50. Should the bulls take over, we may see USD/CAD breaking the 1.3465 (R1) resistance line and aim for the 1.3570 (R2) level. Should the bears take over, we may see the pair breaking the 1.3335 (S1) support line and aim for the 1.3230 (S2) level.            

Other highlights for the day:

In an easygoing Wednesday, we note in the American session that oil traders may turn their attention towards the release of the weekly EIA Crude Oil inventories figure, while no other high-impact financial releases are noted in the calendar. On the monetary front we note that New York Fed President Williams, Fed Board Governor Cook speaks, Atlanta Fed President Bostic speaks, Minneapolis Fed President Kashkari and Fed Board Governor Waller are scheduled to speak.

USD/JPY H4 Chart

Support: 128.60 (S1), 126.40 (S2), 123.50 (S3)

Resistance: 131.40 (R1), 134.80 (R2), 138.15 (R3)

USD/CAD H4 Chart

Support: 1.3335 (S1), 1.3230 (S2), 1.3140

Resistance: 1.3465 (R1), 1.3570 (R2), 1.3685 (R3)

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