Improve risk appetite, progress in US-China trade talks, Dovish FOMC minutes, BOC on hold and cut the forecast; market wrap
The US. Equity indices again advanced and stocks rallied, Dollar index (KTM: USDX) down nearly a percent and US 10 yr Treasuries were steady.
As expected Bank of Canada kept its benchmark interest rates at 1.75% as it did in Dec 2018, but bank cut the outlook on Wednesday. The bank mentioned the recent drop in oil prices has a material impact on the Canadian outlook. The bank also raised concerns on consumer spending and housing investment.
Projections: GDP will grow by 1.7% in 2019, 0.4% slower than the October outlook.
“CPI inflation is projected to edge further down and be below 2 percent through much of 2019, owing mainly to lower gasoline prices.”
Regarding future rate hikes, the bank said, “The appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.”
The first reaction on USDCAD was negative, but tested and held the support 100MA. The setting is still bearish, but the indicators are increasingly oversold.
Against the weaker USD, EUR,NOK, and NZD sit on top of the G10 list. Turning to commodities, Gold and Silver rallied by 0.60% each, but Brent oil rallied nearly 5.00%. In Agri commodities, Sugar prices (KTM symbol: Sugar_Raw) advanced further on the fourth straight session.
In majors, EURUSD run through the first target, we set last week but GBPUSD still trading below the resistance 1.2815.
Key events to watch today
We will see China inflation data in the Asian session and ECB Dec 2018 meeting minutes at 12.30 GMT. On top of these, Powell speaks in Washington followed by FOMC members Bullard and Evans.
Chart of the day: EURCHF
The cross traced out a near-term bottom near 1.1185 in Sep 2018 -Jan 2019 via the formation of a double bottom pattern. While holding 1.1200/1.1185 watch out for 1.1275, 1.1310 and 1.1340 in an extension.
The flip side, if close below the double bottom could retrace further towards 1.1100-1.1050. On medium-term perspective, dip buying between 1.1100-1.1000 using sl below 1.0900 its 161.8 fe (1.1500-1.1220-1.1350. Targets at 1.1200, 1.1350 and 1.1500.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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