The Loonie under the spotlight

The USD dropped against its counterparts especially against the EUR and the pound, yet remained relatively unchanged against the Yen, in a signal of weakness of the Japanese currency. Overall the improvement of the market sentiment may have provided outflows for the greenback. Headlines in the media tend to revolve around US stockmarkets and the earnings reports of various companies, yet overall we note the simultaneous rise of all three major US stockmarket indexes, namely the S&P 500, Dow Jones and Nasdaq in another signal of a more risk on approach by the market yesterday. The weakness of the USD enabled gold’s price in the American session yesterday and during today’s Asian session, to recover the losses which occurred as the day began and as today’s Asian session draws to a close seems to be edging higher. The negative correlation of the USD with gold seems to be on display and may continue affecting the precious metal’s price today.

We note the rise of the Aussie against the USD, which was also supported by the faster acceleration than expected of Australia’s CPI rates on a quarter-on-quarter level, but also by the better market sentiment.

The common currency found some support also from the better-than-expected preliminary PMI figures for April yet on a monetary level, the intentions of the ECB to cut rates in the June meeting may clip any further advancement. Hence we highlight he scheduled statements of ECB policymakers today as potential highlights for EUR traders, while also note Germany’s Ifo indicators for April that could provide some mobility for the common currency in today’s European session.

EUR/USD rose yesterday yet failed to reach the 1.0740 (R1) resistance line. Nevertheless we note that the pair moves in a wide downward channel, while at the same time the RSI indicator has started to near the reading of 50, implying a fading away of the bearish sentiment for the time being. Hence we intend to maintain a bias for a sideways motion currently, possibly within the corridor set by the 1.0740 (R1) resistance line and the 1.0615 (S1) support level. For the bearish outlook to be rejuvenated we would require the pair to break the 1.0615 (S1) support line and aim for the 1.0450 (S2) support level. While for a bullish outlook, we would require the pair to break the 1.0740 (R1) resistance line and start actively aiming for the 1.0890 (R2) resistance level.

Today we intend to focus on the Loonie. Canada’s retail sales for February are to be released and a possible acceleration of the growth rate could provide some support for the Loonie. On the monetary front, we note that the minutes of BoC’s last meeting are to be released and should a dovish tone characterise the document the release may weigh on the CAD. On a fundamental level, we note that oil prices rose yesterday and should they gain more ground today, they may also improve the market sentiment for the Loonie further, given Canada’s status as a major oil-producing economy.

USD/CAD continued to drop for a fifth consecutive day and seems to be aiming for the 1.3610 (S1) support line. On a technical level despite the continuous bearish movement we note also some signs of a possible stabilisation. Characteristically the RSI indicator below our daily chart failed to drop below the reading of 50 refuting the possible build-up of a bearish sentiment on behalf of the market for the pair. Furthermore, the pair’s price action, seems to be finding some support at the 20 moving average, which is also the median of the Bollinger bands. For a bearish outlook to emerge we would require USD/CAD’s price action to break clearly the 1.3610 (S1) support line and start aiming for the 1.3460 (S2) support level. On the flip side in the remote scenario that the bulls take over, we may see the pair breaking the 1.3755 (R1) resistance line and aiming for the 1.3895 (R2) resistance level.

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Today we note the UK’s CBI indicator for trends in industrial orders also for April, while ECB’s Cipollone and Tuominen are to make statements. Later on, we get from the US the Durable Goods orders for March and the weekly US EIA crude oil inventories figure. On the monetary front, ECB’s McCaul and Schnabel are speaking.