EUR/USD: Dollar under pressure after Fed minutes
Macroeconomic overview:
- Many Federal Reserve policymakers expect that interest rates will have to be raised in the "near term," according to the minutes of the U.S. central bank's last policy meeting released on Wednesday.
- The readout from the October 31-November 1 meeting, at which the Fed kept rates unchanged, also showed policymakers generally agreed the economy was poised for strong growth. Several Fed officials also saw improved chances that the U.S. Congress would pass significant tax cuts that would boost business investment.
- While some policymakers said they still needed to see more data before deciding the timing of a rate hike, many of the officials said the jobless rate appeared to be too low for inflation to remain at its current weak level.
- "Participants expected solid growth in consumer spending in the near term, supported by ongoing strength in the labor market," the Fed said in the minutes. "Many participants thought that another increase in the target range for the federal funds rate was likely to be warranted in the near term."
- In the minutes, policymakers engaged in what has become a regular debate over why inflation has remained below the Fed's 2% target for several years. Most agreed that tightness in the labor market would likely fuel higher inflation in the medium term.
- Some of the members who vote on policy, however, expressed concern over the inflation outlook, according to the minutes. These policymakers emphasized they would be looking at upcoming economic data before deciding the timing of future rate rises.
- A couple of policymakers were concerned enough about persistently weak price gains that they suggested the Fed consider a new framework in which it committed to allowing higher inflation to make up for periods of low price rises.
- Since the last policy meeting, Yellen has stuck by her prediction that inflation will soon rebound toward the Fed's target, although on Tuesday she said she is "very uncertain" about this and is open to the possibility that prices could remain low for years to come.
- The USD weakened on the release of minutes from the Federal Reserve's most recent policy meeting and U.S. data.
- New orders for key U.S.-made capital goods unexpectedly fell in October after three straight months of hefty gains, but a sustained increase in shipments pointed to robust business investment and economic momentum as the year winds down. The Commerce Department on Wednesday said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, declined 0.5% last month. That was the biggest drop since September 2016 and followed an upwardly revised 2.1% increase in September.
- Orders of these so-called core capital goods increased at a 14.5% annualized pace in the three months prior to October, the strongest since June 2013. The market had forecast orders of core capital goods increasing 0.5% last month after a previously reported 1.7% jump in September. Core capital goods orders rose 4.4% on a year-on-year basis.
- Shipments of core capital goods advanced 0.4% last month after accelerating by 1.2% in September, pushing the annualized three-month pace to 13.1%. Core capital goods shipments are used to calculate equipment spending in the government's GDP measurement. Business spending on equipment has buoyed economic growth for the past four quarters and is expected to make a solid contribution to GDP in the October-December period.
- The economy's prospects were bolstered by other data on Wednesday showing a decline in the number of Americans filing claims for unemployment benefits. Strong business investment and tightening labor market conditions will likely keep the Federal Reserve on track to raise interest rates next month.
- We expect thin trading today due to Thanksgiving holiday.
Technical analysis and trading signals:
- Bull sentiment is upped as Tuesday’s doji saw an upside extension on Wednesday. RSIs are biased up to bolster a bullish view. An inverse head and shoulders bottom might be forming. If that picture is confirmed strong gains will be likely.
- We stay long for 1.1960.
USD/CAD: Loonie rallies on rising Crude Oil WTI Futures prices
Macroeconomic overview:
- The Canadian dollar strengthened to a nine-day high against the USD on Wednesday as oil prices climbed and minutes from the Federal Reserve's most recent policy meeting weighed on the greenback.
- Oil settled at a two-year high Wednesday after the shutdown of one of the largest crude pipelines from Canada cut supply to the United States.
- The restart of the 590k bpd Keystone pipeline, shut last week due to a spill, could take several weeks.
- U.S. supplies have been a key factor in determining how quickly a global supply overhang can be reduced. The tug-of-war between concerns over supply cuts due to the Keystone delivery cuts and more robust overall inventories shows how the oil market is grappling to untangle the U.S. supply picture.
- Oil has also been supported by an effort led by the Organization of the Petroleum Exporting Countries to end a global supply overhang by restraining output. The deal to curb production expires in March but is widely expected to be extended at a November 30 meeting.
- Strong inflows of foreign money into Canadian stocks and bonds this year are adding to investor confidence that the rally since May in the country's currency is sustainable because it is not just supported by speculative flows.
- Equity and bond market investors, so-called "real money," tend to have longer horizons than often-leveraged speculators betting on the direction of a currency. Increased buying of Canadian securities by foreign portfolio managers could leave the loonie more resilient should market sentiment turn bearish on the currency.
- Foreign investment in Canadian securities rose to CAD 52 billion in the third quarter from the second quarter on the back of two interest rate increases by the Bank of Canada that boosted the appeal of Canada's government bonds and its corporate debt. That has pushed the year-to-date foreign inflows to CAD 152 billion, on track to match or beat last year's record of CAD 172 billion. Net inflows easily exceed the amount needed to cover Canada's annual current account deficit of about CAD 60 billion.
- The loonie has been pressured recently by concern that an uncertain outlook for the North American Free Trade Agreement will stall Bank of Canada interest rate hikes.
- The United States, Mexico and Canada failed to resolve any major differences in a fifth round of talks to rework the NAFTA trade deal, drawing a swift complaint from the Trump administration on Tuesday that the lack of progress could doom the process.
- Canadian retail sales data for September is due on Thursday.
Technical analysis and trading signals:
- The USD/CAD broke and closed below short-term moving averages and 23.6% fibo of September-October rise (1.2714), the two support level that we mentioned yesterday. The next support is November 10 low of 1.2666. A break would open the way to 50% fibo at 1.2488.
- We stick to our bearish view with the short position opened at 1.2815. We have lowered the target to 1.2500.
TRADING STRATEGIES SUMMARY:
FOREX - MAJOR PAIRS: 
FOREX - MAJOR CROSSES: 
PRECIOUS METALS: 
How to read these tables?
1. Support/Resistance - three closest important support/resistance levels
2. Position/Trading Idea:
BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.
3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)
5. Position Size (forex)- position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).
6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.