BoC’s interest rate decision and Fed Chairman Powell

The USD gained against its counterparts yesterday recovering the lost ground of the day before. We tend to highlight the better-than-expected data released yesterday for October. The data showed that economic activity in both the manufacturing and services sectors of the US increased instead of decreasing as expected and highlighted the resilience of the US economy. The data were in stark contrast with the respective European data of the same month, underscoring the divergence in the economic outlook of the US with the rest of the world. On the other hand, we note that the better-than-expected data may allow the Fed to proceed with additional tightening if it so wishes. Today we note the speech of Fed Chairman Powell and any possible hawkish remarks could provide some support for the USD.

North of the US border, the Bank of Canada is to release its interest rate decision and the bank is expected to remain on hold at 5.00% with CAD OIS currently implying a 94.24% probability for such a scenario to materialize. Hence the market’s attention may shift towards the accompanying statement and BoC Governor Macklem’s press conference later on. The market expects that the bank has reached its terminal rate while we also note that the CPI rates both at a headline and a core level continued to slow down which may allow the bank to maintain a cautious stance. Should the bank take the markets by surprise and allow for some hawkish signals to be released we may see the CAD getting asymmetric support, otherwise the Loonie may weaken or even prove to be indifferent as the market’s expectations could be enhanced.

USD/CAD seems to have stabilised after clearly breaking the 1.3690 (S1) resistance line, now turned to support. We maintain a bullish outlook for the pair as long as it remains above the upward trendline incepted since the 12 of October while the RSI indicator remains between the readings of 50 and 70, implying some bullish tendencies in the market sentiment. Yet the price action has reached the upper Bollinger band which may slow down the bulls or even cause a correction lower. Should the bulls actually maintain control over the pair, we may see it breaking the 1.3800 (R1) resistance line and aim for the 1.3900 (R1) resistance hurdle. Should the bears take over we expect the pair to break the 1.3690 (S1) line and aim for the 1.3565 (S2) level.

On the commodities front, we note the continuous weakening of oil prices since last Friday. It should be noted that the easing of US sanctions on Venezuela last week, has allowed the tightness of the supply side of the commodity to ease and thus weaken its prices. Yet the US oil market seems to remain tight as API reported another drawdown of US oil inventories, thus oil traders may focus on the EIA crude oil inventories figure later today for confirmation. Yet we also note the risk of an escalation of the Israeli conflict which could push oil prices higher.

WTI’s price continued to edge lower breaking the 84.50 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook as long as the downward trendline initiated since the 20 of October continues to lead WTI’s price and also given that the RSI indicator remains near the reading of 30, implying a strong bearish sentiment. Should the selling interest be maintained we may see WTI’s price breaking the 80.75 (S1) support nest and aim for the 77.50 (S2) barrier. Should buyers take the reins, WTI’s price may break the prementioned downward trendline, the 84.50 (R1) line and aim for the 87.50 (R2) resistance nest.

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Today we note the release of Germany’s Ifo Business Climate for October and in the American session, we note from the US the New Home Sales figure for September. On the monetary front, we note that ECB President Christine Lagarde is also scheduled to speak, while during tomorrow’s Asian session, RBA Governor Bullock is going to make statements.