Market worries of Tuesday were reversed yesterday as the headlines provided for some hopes for progress in the US-Sino relationships. Hopes began to rise again in the market as Bloomberg released a report which described the two sides as moving closer to an agreement, citing people familiar with the talks. Also, US President Trump stated that negotiations with China about trade were going “very well”, practically reversing comments made on Tuesday that a deal might have to wait until after the elections 2020. Analysts tend to note that the market’s reaction was as positive as could be expected, while others stated that caution may still be present as the reaction was more limited than usual. Should the positive headlines about the US relationships continue to reel in we could see safe havens such as the Yen weakening while the USD commodity currencies such as the Aussie could be getting additional support. USD/JPY rose yesterday, breaking the downward trendline incepted since the 2nd of the month and tested the 109.00 (R1) resistance line. As the pair broke the prementioned downward trendline, we switch our outlook in favour of a sideways movement. Should the pair find fresh buying orders along its path, we could see it breaking the 109.00 (R1) resistance line, which contained the pair’s price action yesterday and aim for the 109.70 (R2) resistance level. On the flip side should the pair come under the market’s selling interest, we could see it breaking the 108.35 (S1) support line and aim for the 107.75 (S2) support level.
…while BoC remains on hold and the Looney rallies…
BoC remained on hold yesterday as was widely expected maintaining its 1.75% interest rate level unchanged. It should be noted that the bank struck an optimistic tone, giving the markets a pleasant surprise and expectations about a possible future rate cut dropped substantially, as per CAD OIS the next cut is expected currently to take place after 2020. It should be noted that the bank sees nascent evidence that global economy is stabilizing, however also mentioned that ongoing trade conflicts remain biggest risk to its outlook. The looney strengthened at the release and got some additional support as oil prices rose substantially yesterday, and the positive sentiment could continue today as a weight was lifted, yet at the same time CAD traders may also be turning their attention to oil prices and the OPEC meeting. USD/CAD dropped breaking the 1.3230 (R1) support line, now turned to resistance, breaking the sideways motion of the past. Hence, we tend to switch to our outlook in favour of a bearish momentum. Also we would like to note that he RSI indicator in the 4 hour chart, has broken below the reading of 30, confirming the dominance of the bears, yet at the same time may imply that the pair’s short position is overcrowded and sentiment may reverse. Should the bears maintain control over the pair’s direction, we could see it breaking the 1.3125 (S1) support line which maintained support for the pair, end of October, beginning of November.
Other economic highlights today and early tomorrow
Today, during the European session we get Germany’s factory orders growth rate for October, and from the Eurozone the revised GDP growth rate for Q3 as well as the area’s retail sales growth rate for October. In the American session we get from the US the trade balance for October, the Initial jobless claims figure for last week and the main release of the day from the US could be the factory orders growth rate for October. Also in the American session, we get from Canada the trade data for October as well as the Ivey PMI for November. In tomorrow’s Asian session, we get Japan’s household spending growth rate for October. Please bear in mind that the rate is expected to suffer a substantially adverse effect from the sales tax hike, implemented by Abe’s government during the month.
USD/JPY 4 Hour
Support: 108.35 (S1), 107.75 (S2), 107.10 (S3)
Resistance: 109.00 (R1), 109.70 (R2), 110.50 (R3)
USD/CAD 4 Hour
Support: 1.3125 (S1), 1.3025 (S2), 1.2930 (S3)
Resistance: 1.3230 (R1), 1.3335 (R2), 1.3430 (R3)
