USD Retreats As Fed Chairman’s Nomination Looms

Nov 19 21, 10:34 GMT

The USD tended to retreat against a number of its counterparts yesterday amidst low volatility, yet seems about to end the week higher. It should be noted that yesterday’s financial releases may have provided some mixed emotions as the initial jobless claims figure ticked up instead of dropping as expected, yet the Philly Fed business index jumped substantially implying a greater degree of economic activity in the wider Philly area. No major financial releases are expected from the US today hence we expect the greenback to be driven by fundamentals and we note that a number of Fed policymakers are scheduled to speak and could sway the market’s mood. Remaining on the Fed issues we expect Biden to provide with his nominee for the Fed’s top position and the main candidates currently considered are incumbent Fed Chairman Jerome Powell and the Fed’s Board of Governor member Lael Brainard. The issue is strongly political as the left leaning side of the Democrats seem to favour Brainard for a stronger supervision of financial institutions, while Republicans seem to favour Powell, and overall caution is advised as unexpected volatility could be created by the issue.

EUR/USD rose yesterday testing the 1.1370 (R1) resistance line but not breaking it. As the pair’s upward movement broke the downward trendline characterising its movement since the 10th of the month, we temporarily switch our bearish outlook in favour of a sideways movement between the 1.1370 (R1) resistance line and the 1.1300 (S1) support line. Please note that the RSI indicator below our 4-hour chart runs just below the reading of 50 implying a rather indecisive market. Should the bulls take over we may see EUR/USD breaking the 1.1370 (R1) resistance line and tale aim for the 1.1445 (R2) resistance level. Should the bears regain the momentum like in the past week, we may see the pair dropping, breaking the 1.1300 (S1) support line and take aim of the 1.1225 (S2) level.

CAD stabilises as oil prices seem to regain momentum

The Loonie tended to stabilize against the USD yesterday yet today CAD traders are expected to keep an eye out for the release of Septembers’ retail sales growth rate. Should the rate slowdown and decline into the negatives we may see Loonie traders being disappointed as it would imply that the average Canadian consumer is less willing and/or able to spend in the Canadian economy and contribute to its recovery. On the other hand, CAD traders are also keeping an eye out for oil prices, which found some support yesterday as oil traders seemed able to look past the possibility of the US in cooperation with other countries releasing part of their strategic reserves. Should oil prices continue to rise, we may see the CAD finding some further support as Canada is a major oil producing country.

USD/CAD retreated after testing the 1.2645 (R1) resistance line yesterday and seems to show some signs of stabilisation. We tend to maintain our bullish outlook for the pair as long as it remains above the upward trendline incepted since the 27th of October. The RSI indicator below our 4-hour chart is between the readings of 50 and 70 implying an advantage for the bulls. Should the buying interest of the market persist, we may see the pair breaking the 1.2645 (R1) resistance line in search of higher highs. Should a correction lower be performed by the market for USD/CAD, we may see the pair breaking the 1.2580 (S1) support line and aim for the 1.2500 (S2) level.

Other market highlights for today

Today in the European session we note the release of Norway’s GDP rate for Q3 as well as UK’s retail sales growth rate for October. In the American session we get Canada’s retail sales for September and oil traders may also be interested in the release of the weekly US Baker Hughes oil rig count. On the monetary front we note the planned speeches of ECB President Lagarde and from the Fed we note the Fed’s Vice Chairman Clarida as well as Fed Board Governor Waller.

EUR/USD H4 Chart