Events and Volatility
A rise in volatility is expected to take place today as many announcements are going to be published
Wednesday’s main focus will be the Bank of Canada’s monetary policy announcement. We don’t expect any policy change, but the price action on Canadian dollar tells us that investors are anticipating positive comments from the BoC. A lot has changed since their last March’s meeting. Six weeks ago, they raised concerns about lower wage and household credit growth, but since then, oil prices hit a 3-year high, retail sales rebounded, the unemployment rate declined, job growth accelerated, housing market activity improved, inflation increased, and manufacturing activity expanded at a robust rate. Both U.S. President Trump and Canadian Prime Minister Trudeau have said they are close to reaching a NAFTA deal, and, according to Mexico’s Economy Minister, the negotiation team could meet again on Thursday in Washington to start working on their issues again, and hopefully move the process forward
On the other hand, economic sanctions appear to be a very effective tool for challenging rivals in the market. A couple of weeks ago, the U.S. pushed Rusal to the brink of survival by limiting its services, banning the maintenance of its dollar accounts, and prohibiting Americans from conducting any business with the company. Although these steps may be seen as an attempt to influence the Russian position in Syria, they also make sense from an economic viewpoint.
For the first time, the Minutes revealed that the RBA board explicitly recognizes “it was more likely that the next move in the cash rate would be up, rather than down” (news.com). This may not seem significant since the RBA governor has been stating this for some time. Still, this is the first time the board has expressed its support for this kind of view and now confirms the RBA’s bent towards a tightening bias, in line with what we observe across the majority of G10 central banks.
GBP remains in play on Wednesday with U.K. CPI scheduled for release. Price pressures are expected to ease. Investors think that the Bank of England will raise interest rates next month but they need to see data validate that view before extending the pair’s gains.
On the daily chart, the price had done a big effort to reach a pivotal level at 1.4335
there’s a special price action with a hammer, by forming a descending wedge
If a retracement is confirmed, then it might be a correction on its way to 1.409
On the daily chart, the price has broken the down trendline from the low of 2018
The price is located at a very sensitive area, as it reached the lower trendline connecting the highs and the resistance zone between 1.566-1.553
Any breakthrough would expose it to 1.61 level, any continuation of the bears would retest 1.52 level
The price was moving in up channel on 4H until it has broken it last Friday
The pair needs a motivating momentum to go down further, so it retested the broken channel with rebounding from the lower trendline connecting the highs as it shown.
It is also respecting the 200 moving average, and provided us with an AB=CD harmonic pattern.
The price is expected to visit 1.5825 again then to 1.574.