The Canadian dollar jumped against the US dollar after the latest Bank of Canada decision. The bank decided to leave interest rates unchanged at 0.25%. The bank also hinted that interest rate hikes will be coming soon. This is because the bank decided to wind down the quantitative easing policy. It expects that the economy will continue doing well in the coming months. It sees the economy rising by 6.5% in 2021 and then retreating to 4.5% in 2022. The bank expects that inflation will go back to 2% in the coming year.
The euro remained in a tight range against the US dollar as investors waited for the upcoming ECB decision. The decision comes at a time when the Eurozone economy is experiencing an uneven economic recovery. Also, inflation has jumped to the highest level in more than 13 years while the unemployment rate remains high. Therefore, analysts expect that Christine Lagarde will have to achieve a balancing act. She will likely maintain her previous stance that the bank is not close to hiking interest rates. She will also likely provide hints about when tapering will happen.
The US dollar index held steady as investors waited for the first estimate of the US GDP growth in the third quarter. Economists expect the data to show that the economic recovery moderated in the third quarter. Specifically, the median estimate is that the UK economy grew by 2.7% in the third quarter after growing by 6.7% in Q2. At the same time, they expect that the GDP price index rose by 5.5%. The dollar will also react to the latest initial jobless claims numbers. The data is expected to show that the number of initial jobless claims declined to 285k last week while continuing claims declined to 2.41 million.
EURUSD
The EURUSD was relatively calm as investors waited for the ECB decision. The pair is trading at 1.1613, which was slightly above this week’s low at 1.1585. On the four-hour chart, the pair is along the middle line of the Bollinger Bands pattern. It is also along the 25-day moving average while the MACD has moved below the neutral line. Therefore, the pair will likely remain in the current range and break out in either direction after the ECB decision.
USDCAD
The USDCAD pair tumbled sharply after the latest BOC decision. It moved to a low of 1.2300, which was the lowest level since October 20th. On the four-hour chart, the pair moved below the short and longer-term moving averages while the MACD has formed a bullish divergence pattern. The pair will likely maintain the bearish momentum as the divergence between the Fed and BOC continue.
NDAQ
The Nasdaq 100 index soared to an all-time high as investors cheered the strong earnings by Microsoft and Google. The index is trading at $15,708, a level it has struggled to move above in the past few months. It is being supported by the short and longer-term moving averages. Momentum oscillators like the MACD and the RSI have also rebounded. Therefore, the path of least resistance for the index is to the upside.
