The BoC is to release its interest rate decision today (15:00, GTM) and is widely expected to remain on hold at +1.75%. Currently CAD OIS imply a probability of 97% for such a scenario and market focus seems to concentrate on the accompanying statement. With the GDP growth rate taking a hit for Q4 (+0.4% qoq (annualized)) and the CPI rate (+1.4% yoy) remaining below the bank’s median target (+2.00% yoy) it’s difficult to see how the bank may avoid a more dovish tone. On the other hand analysts point out that the bank may want to keep the door open for any future rate hikes, hence adopt a neutral tone. Also we see the case for the housing market, household consumption, global trading conditions and the oil market to remain in focus for the BoC which may remain data dependent. We could see the CAD reacting negatively to an overly dovish tone by the bank, yet please be advised that should the bank adopt a more neutral tone, we could see an asymmetrically positive response from the Loonie. USD/CAD continued to rise yesterday and during today’s Asian session, broke the 1.3360 (S1) resistance line (now turned to support). We see the case for the pair to maintain a bullish market, as long as the upward trendline incepted since Monday remains intact. On the other hand please be advised that we expect the pair to be very sensitive to BoC’s interest rate decision and that the RSI indicator in the 4 hour chart is steadily near the reading of 70, implying a rather overcrowded long position for the pair. Should the pair find fresh buying orders along its path, we could see it aiming if not breaking the 1.3425 (R1) resistance line. Should it come under the selling interest of the market, we could see the pair breaking the 1.3360 (S1) support line, the prementioned upward trendline and aim for the 1.3290 (S2) support hurdle.
AUD weakens on GDP slowdown.
The Aussie weakened during today’s Asian session, as the Australian GDP growth rate decelerated even more than expected (Q4: 2.3% yoy vs. Survey:+2.5% yoy). Analysts point out that the slowdown more or less confirms a slowdown in demand and come into contradiction to the bank’s estimates of a 3% growth in 2019, announced yesterday. RBA governor Lowe had tried to prepare the markets for the GDP slowdown ahead of the release, while at the same time stating that it is difficult to imagine rates rising in 2019. We expect the AUD to remain under pressure, yet Australia’s retail sales growth rate due out tomorrow, may give a breather to the Aussie. AUD/USD dropped during today’s Asian session, breaking the 0.7065 (R1) support line (now turned to resistance). We expect the pair to remain under pressure in a bearish market currently, while tomorrow’s release of Australia’s retail sales could provide a breather for the pair. Should the bears continue to dictate the pair’s direction, we could see it aiming if not breaking the 0.6985 (S1) support line, while if the bulls take over we could see the pair breaking the 0.7065 (R1) resistance line and aim for the 0.7150 (R2) resistance barrier.
Today’s other economic highlights
In today’s late European session we get from Turkey CBRT’s interest rate decision. We expect the bank to maintain its 1 week repo rate at +24.00% and the market’s attention to turn to the accompanying statement. Should the bank continue to show a firm stance in favour of a tight monetary policy we could see the TRY strengthening, on the other hand should the bank tweak its monetary policy, we could see the TRY weakening. In the American session, we get from the US the ADP national employment figure for February, the trade balance figure for December, and the EIA crude oil inventories figure for last week. From Canada, besides the BoC interest rate decision, we get the trade balance figure for December and the Ivey PMI for February. As for speakers BoE’s Jon Cunliffe, Cleveland Fed President Mester, NY Fed President Williams, as well as BoE’s Saunders speak.
USD/CAD
Support: 1.3360 (S1), 1.3290 (S2), 1.3215 (S3)
Resistance: 1.3425 (R1), 1.3510 (R2), 1.3575 (R3)
AUD/USD H4
Support: 0.6985 (S1), 0.6915 (S2), 0.6830 (S3)
Resistance: 0.7065 (R1), 0.7150 (R2), 0.7230 (R3)
