Love is in the air. Well, not really, but there is a whiff of optimism wafting through markets as the latest round of US/China trade talks ends. President Trump even tweeted: “talks with China are going well.” The major global equity indices are higher, as are commodity prices (except gold) and the US dollar inched lower against the majors except for the Japanese yen.
President Trump addressed the nation last night, and the Democrat leaders rebutted him afterwards. A Sesame Street summary of both speeches is here.
Trading was a tad subdued ahead of this afternoon’s release of the FOMC minutes from December 19. Fed Chair Jerome Powell appears to have reversed himself from the message he gave markets in December. Traders are hoping that the minutes will shed some light on the Fed’s thinking.
EURUSD traded sideways in a 1.1438-1.1477 rang, garnering a modicum of support when the Eurozone Employment rate at 7.9% was a tad better than forecast. ( 8.1%). EURUSD remains locked in a 1.1300-1.1500 range.
GBPUSD technicals are bearish with the downtrend from November still intact while prices are below 1.2800. Prices are vulnerable to wild swings ahead of next week’s Brexit vote. Traders are also waiting to hear from Bank of England Governor Mark Carney who is speaking this morning.
USDJPY drifted higher overnight supported by the improved market risk tone and a rise in US 10-year Treasury yields which are sitting at 2.735%. A break above 109.10 would target 110.00.
WTI oil prices rallied 2.0% from yesterday’s close of $49.79/barrel to this morning’s opening level of $50.80/b. The move was fueled by renewed hopes for a US/China trade deal and the American Petroleum Institutes report that US crude inventories shrank by 6.27 million barrels as of January 4.
USDCAD extended yesterday’s losses overnight supported by higher crude prices and expectations for a mildly hawkish Bank of Canada policy statement today. The quarterly Monetary Policy Report is on tap as well. Strategists are expecting tweaks to GDP growth and a lower inflation outlook.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish. The 50% Fibonacci retracement level of the October-January range at 1.3220 survived an overnight test however the subsequent bounce was very shallow. A slightly hawkish sounding BoC statement or MPR could trigger a break and eventually lead to a test of 1.3000. The 100 day moving average is at 1.3176 and the 200 day moving average is at 1.3079. both should provide some support. For today, USDCAD support is at 1.3220, 1.3170 and 1.3130. Resistance is at 1.3270 and 1.3310. Today’s Range 1.3170-1.3270