Forexlive Americas FX news wrap: Bank of Canada tilts more dovish
Forex news for NY trading on January 22, 2020
- US stocks close mixed in a up and back down session
- World Health Organization: Delays decision on whether to declare coronavirus an int'l emergency
- US crude oil futures settle at $56.74
- ECB meeting likely a non-event but risk balance is for a hawkish surprise in tone - BofA
- Chinese city Wuhan suspends outbound flights and rail services
- Boris Johnson's Brexit deal passes through UK parliament
- More from SNB Maechler: US decision on currency list doesn't change policy
- SNB Maechler: SNB is ready to intervene in FX markets if needed
- What's priced in for the Bank of Canada now
- European shares are ending the session in the red
- It is hard to pick a top, but the S&P did stall at a topside trend line today
- Poloz Q&A: Effect of new Federal gov't tax cut is equivalent to about 0.1% GDP growth
- BOC's Poloz: Rate cut wasn't warranted 'at this time'
- Full text of the January 22, 2020 Bank of Canada rate decision
- US existing home sales for December 5.54M vs 5.43M estimate
- Bank of Canada leaves rates unchanged at 1.75% as expected
- UN experts call for probe of Bezos phone hack allegations
- US November FHFA house price index +0.2% vs +0.3% expected
- Canada December new housing price index +0.2% vs 0.0% expected
- Chicago Fed national activity index for December -0.35 versus 0.13 estimate
- Canada wholesale trade sales for November -1.2% versus -0.4% estimate
- Canada December CPI +2.2% vs +2.3% y/y expected
- The GBP is the strongest, while the CHF is the weakest as NA traders enter for the day
In other markets:
- Spot gold is ending the day little changed. The precious metal is trading at $1558.85, up $0.68 or 0.04%. The high reached $1559.30. The low extended to $1550.29
- WTI crude oil futures fell sharply and in the process fell below the 100 day MA. The contract is trading at $6.53, down $1.83 or -3.15%. The contract is trading at its lows for the day.
The news today came out of the Bank of Canada. They kept rates unchanged but had a more dovish view going forward. They said:
- Canadian economy no longer operating close capacity
- indicators of consumer confidence and spending have been unexpectedly soft
- business investment appears to have weakened over a strong third-quarter
Moreover, they removed description of key rate as 'appropriate' and said that:
- In determining future path for rates will watch closely to see if recent slowdown in growth is more persistent than forecast.
Admittedly in the press conference Gov. Poloz toned down the dovishness saying:
- Our rates remain appropriate
- I believe the issues in the economy will prove temporary
The USDCAD surged on the headlines (regardless of the less dovish comments at the press conference). In the process, the price moved above the high from January at 1.3101 and the 200 bar moving average on the 4 hour chart at the same level. The high price extended to 1.3152 before backing off a bit into the close. We currently trade at 1.31349. Going forward staying above the 1.3101 level will keep the buyers more in control. On the topside more momentum will have to deal with the 100 day moving average at 1.3181. The last traded above its 100 day moving average on December 11. The level also corresponds with the 61.8% retracement of the move down from the November high (that is at 1.3183).
In other news today the Chicago Fed national activity index, a compilation of 85 different economic indicators, fell to -0.35. That was worse than the 0.13 estimate. However, the index tends to be revised since nearly half of the inputs have not even be released yet (they plug-in estimates).
Also, in the US existing home sales came in much stronger than expectations as supply issues remain a big problem. The month supply fell to 3.0 months from 3.7 months in the last report. The lack of supply is pushing up prices and making affordability difficult - especially for new buyers.
Although the coronavirus fear ebbed in trading today, the number of deaths have increased to 17 (from 6 yesterday). The WHO will make a decision tomorrow as to whether to declare the virus an international emergency. If so, that may get the attention of the markets once again.
US stocks today closed mixed with the S&P near unchanged with a small gain, the Dow near unchanged with a small decline and the Nasdaq up marginally. Although mixed, the major indices are closing near the lows for the day, giving up decent gains in the process. European shares also closed their session near lows after trading higher earlier.
Looking at the snapshot and rankings of the strongest to weakest currencies today, the GBP was the runaway strongest. The currency continue its move to the upside following the better jobs report yesterday. The CAD was the the runaway weakest of the major currencies. In fact if you look at the % changes of the major currencies vs the USD, apart from the changes of the GBP and CAD, the other changes were within 0.10% of the closes from yesterday.
Some technical comments:
- The GBPUSD moved above its 50% retracement of the move down from the December 31 high at 1.31185 and stayed above in the NY session. The next target on the topside comes in at the 61.8% retracement at 1.31574 and the January 7 high of 1.31694. If the 50% retracement is broken, that could see the price moved back down to retest the 1.3100 level.
- The Australian jobs report will be released in the new day. The pair traded above and below its 100 day moving average as it awaits the next shove - potentially from the data. The 100 day moving average comes in at 0.68379. The pair is trading just above that level at 0.68436 (after trading above and below it all day long).
- The EURUSD at another up and down trading session, but with the price moving to the lowest level since December 20. At the low at 1.10696, the price got within 4 pips of the key 100 day MA at the 1.10655. The bounce higher it is getting closer to it's falling 100 hour moving average at 1.1098. So as we head into the new day, traders will be looking for the shove above the 100 hour moving average 1.1098, or the shove back down for a potential test of the 100 day MA at 1.10655.
Good fortune with the trading.