BoC Interest Rate Decision
- BoC is to announce it’s interest rate decision and is expected to remain on hold at +1.25%. CAD OIS imply a probability for the bank to remain on hold at 96.17%. Recent inflation deceleration and the January rate hike, strengthen the argument for the bank to remain on hold. Hence, market focus is expected to shift to the accompanying statement. It will be interesting to see if there are going to be any comments about the NAFTA negotiations and the proposed US steel tariffs. We expect a rather cautious to dovish tone in the statement. CAD could weaken if the prospects about the Canadian economy in the statement are clouded.
- USD/CAD trade in a sideways manner in the past few days around the 1.2910 (S1) support line. We see the case for the pair to continue to trade in a slightly bullish mood for the next couple of days, especially if the accompanying statement of the BoC interest rate decision, has a dovish tone. Should the bulls have the upper hand on the market, we could see the pair breaking the 1.3080 (R1) resistance line and aim for the 1.3200 (R2) resistance hurdle. On the other hand, should the bears take the reins, we could see the pair breaking clearly the 1.2910 (S1) support level and even the 1.2800(S2) support barrier.
One resignation closer to a trade war?
- Gary Cohn, top economic advisor in the US White House, stated yesterday that he intends to resign. Among other reasons for his resignation, a recent dispute about the tariffs issue was cited. We see the case for further uncertainty to rise as Mr. Cohn was considered a stabilizing factor in the White House. US dollar could weaken, as uncertainty rises and possible tariff wars draw nearer.
- USD/JPY traded in a sideways manner the past few days near the 105.55 (S1) support line. We see the case for the pair to trade in a slightly bearish mood, as US fundamental news may weaken the USD and BoJ interest rate decision becomes imminent. Please also note that the important role of JPY as a safe heaven, could magnify the overall effect. Also, technically, the downward trend line incepted since the 8th of January supports the argument for the pair to trade in a slightly bearish mood. Should the pair come under selling interest we could see it breaking the 105.55 (S1) support line and aim if not breaking the 104.66 (S2) support level. Should the pair find fresh buying orders along its path, we could see it breaking the aforementioned downward trend line and the 106.95 (R1) resistance level.
Today’s other economic highlights:
- During the European day UK’s Halifax House Prices for February and eurozone’s revised GDP for Q4. In the North American session from the US we get the ADP Employment change which could weaken the USD, the US trade balance deficit for January and the Crude Oil inventories for this week. From Canada we get January’s Trade Balance deficit and BoC’s interest rate decision. As for speakers FOMC member William Dudley and FOMC member Bostic speak.
USD/JPY
·Support: 105.55 (S1), 104.66(S2), 103.65(S3)
·Resistance: 106.95(R1), 108.30(R2), 109.20(R3)
USD/CAD
·Support: 1.2910(S1), 1.2800(S2), 1.2610(S3)
·Resistance: 1.3080(R1), 1.3200(R2), 1.3350(R3)