Volatility and liquidity were lower in the FX markets during the previous trading sessions due to the absence of tier 1 economic events.
Stock markets took another step to the downside yesterday as US Treasuries moved higher on the back of increased trade war concerns.
The 10-year yield dropped to 2.26%, and this caused an inversion on the part of the curve, something recognized by many observers to signal a looming recession.
Stock Exchange indices finished well in the red with the Dow Jones leading the way, finishing down 0.93% followed by the S&P and Nasdaq, down 0.84% and 0.39% respectively.
Greenback moved higher with the Dxy now back around 98.00 as the Euro edged lower but traders are expecting a stronger reaction in the currencies as we progress through the next few sessions with risk pairs a particular focus.
Bank of Canada – Monetary Policy Decision
The Bank of Canada (BoC) is widely anticipated to hold its policy unchanged at 14:00 GMT. Recent economic figures and some words by Governor Poloz support for a slightly more confident tone overall, which may boost the loonie.
A surveyed report by Bloomberg reveals that all 25 analysts see policymakers dropping the benchmark overnight rate at 1.75% in a decision at 10 a.m. in Ottawa. That would score a fifth continuous hold by the central bank since it last raised borrowing costs in October.
Longer-term, most analysts predict rates won’t rise again until next year at the earliest. Therefore, the market is likely to continue trading with a sentiment that the Bank of Canada Governor Stephen Poloz will probably keep interest rates unchanged, thereby, keeping the USD/CAD slightly bearish.
USD/CAD – Breakouts of Ascending Triangle – 1.3540 Eyed
It has had happened over three times in this month, the USD/CAD has tested but failed to close above 1.3500 but not anymore. The USD/CAD has already violated the ascending triangle pattern, which was keeping the pair under 1.3500. The USD/CAD price has been supported by an ascending trendline formed on the 2-hour chart. It’s likely to support the pair around 1.3485 now.
Key Trading Level: 1.3434
USD/CAD – Trade Tips
Rate = No Change = USDCAD will serge to 1.3550 area; this is a high price to sell as USD/CAD is likely to come down 250 pips later. All the best!